Edward Miliband: Obviously, we will look at any proposals that come forward, but I say to the hon. Gentleman-maybe he has not followed the matter as closely as he might have done-that we have unveiled the most environmentally stringent conditions for new coal-fired power stations of any country in the world. We consulted on them and we have now put them into national policy statements. The proposals have been widely welcomed, both by the green groups that he mentions and by energy companies, as striking the right balance. A plant-level emissions standard could also have a role. As I understand it, the Environment Agency already has powers to introduce one, but we will examine any proposals that come forward.

Edward Miliband: I think I am right in saying that the Peterhead proposal was for a gas-fired power station. Our concentration in spending significant amounts of money has been on coal-fired power stations. However, my hon. Friend is right that pre-combustion has an important role. We have said that of the four demonstration projects up to two will be pre-combustion, precisely because we recognise the importance of that technology. It is important to say that as we spend a significant sum on carbon capture and storage-as I said, it is the largest sum spent by any country in the world-we need to test all the technologies to drive it forward, including pre-combustion.

David Drew: Would my right hon. Friend say something about the current Warm Front funding, and how long it is taking individual households, particularly those that do not have central heating or whose boilers have been condemned, to get action? There seems to be some concern that it is taking up to six months. In this weather, that is six months too long.

Edward Miliband: I will look at the amendment-but the last Bill that came forward from the Liberal Democrats was an uncosted shopping list, with no basis for paying for it. That is a luxury of opposition but not a luxury of government. We are planning, and I can commit to, a national energy programme over the next 10 years. We are currently consulting on it, and will have more to say about it in the coming weeks.

Derek Twigg: Ofgem, the regulator, has a very important role in reducing fuel poverty, but the Public Bill Committee on the Energy Bill has just heard evidence that it does not necessarily have the confidence to know legally when it can intervene to force companies to do more. Will my right hon. Friend comment on that, and say how the Energy Bill will help to make clear to Ofgem what responsibilities it has to help people?

Edward Miliband: I look forward to reading the report of proceedings in the Energy Bill Committee-it sounds as if many interesting things were said. One purpose of the Bill is precisely to strengthen Ofgem's powers in a number of respects and to make it a more proactive regulator-a regulator that not only relies on competition to help consumers, but realises that it has a duty to be proactive on their behalf. It has done more of that in the past year, including taking action on pre-payment meters and other issues, but I am sure there is more to do.

David Kidney: The current exceptionally cold weather causes us all concern for the well-being of all households in fuel poverty. The Department for Work and Pensions makes cold weather payments as a contribution towards extra heating costs during a week of very cold weather in the area in which an eligible customer lives. This winter the number of cold weather payments made is estimated to be worth £185 million. Payments are made automatically, but if anyone has questions about the help available to them, they can access information on the directgov website-or if they do not have access to, or inclination to use, the internet, they can always ask their Member of Parliament.
	The estimated number of households in fuel poverty in the UK was around 2 million in 2003. The latest year for which figures are available is 2007, and they show that there were then around 4 million fuel-poor households in the UK.

David Kidney: It is very frustrating to me that the figures for fuel poverty are two years old, so the figure that the hon. Gentleman gives is an estimate. There is no doubt that rising fuel prices between 2004 and 2008 have caused us great difficulty in meeting that target, but I have not given up trying to meet it. All our efforts are directed towards eradicating fuel poverty, as we are indeed required to do.

John Penrose: Will the Minister accept that during one of the worst cold snaps for years, when vulnerable people such as pensioners in my constituency and elsewhere are struggling to keep their homes warm, it is especially important that consumers can switch to the cheapest available energy tariff offered by their supplier? Would he therefore agree that energy companies should be obliged to publish information on each customer's bill showing whether they would be better off on an alternative scheme?

Mark Todd: May I draw the Minister's attention to the needs, this weather, of those who live in mobile homes, many of whom are on low incomes? They have a very limited choice of energy supply, and also lack options for additional insulation to improve the efficiency of their homes. I have raised this issue before, and the Government have so far done very little to assist that group of consumers to reduce the proportion of their income spent on energy bills. Is there anything that he can do now?

Colin Challen: I welcome my right hon. Friend's statement this morning that we should redouble our efforts following Copenhagen and not throw our hands up in despair, even though the result was depressing. Will the Government be pressing to go ahead with the EU's higher than intended carbon emissions savings budget, and will my right hon. Friend ask the Committee on Climate Change to review as a matter of urgency the costs of doing so?

David Kidney: A lot of progress has been made on developing tidal energy schemes. The Crown Estate leasing round for the Pentland firth is on course, and we expect the Crown Estate to announce the successful bidders by the end of March. There are three feasibility studies for tidal range projects currently under way, for the Severn, the Mersey and the Solway firth. Officials have now received the final report on the screening study for marine energy development in English and Welsh waters, which will inform Ministers' decision on whether to proceed with a strategic environmental assessment for English and Welsh waters.

Andy Reed: As my hon. Friend rightly said, any scheme has to be a reasonable scheme that works. Does he therefore recognise the work of the Energy Technologies Institute, which he visited in my constituency some time ago, in ensuring that the technologies that we introduce are the most efficient and best for the country, and will make a genuine economic impact? What steps is he taking to ensure that some of the private sector partners required to make that £1 billion Energy Technologies Institute work are being involved, and can he assist in ensuring that that happens?

Brian Binley: We have heard evidence in the Energy and Climate Change Committee of the great enthusiasm of some generators for connecting carbon capture and storage with extra production from the North sea to the tune of about 15 per cent. That has not been mentioned much, and I want to ask the enthusiastic Secretary of State whether he will get enthusiastic about this particular point?  [ Interruption. ]

David Kidney: The Government accepted in 2006 the recommendations of the Committee on Radioactive Waste Management on geological disposal, coupled with safe and secure interim storage. Following public consultation, the Government published the White Paper, "Managing Radioactive Waste Safely: A Framework for Implementing Geological Disposal" in June 2008. The first step is an expression of interest from a community that may be interested in hosting a geological disposal facility. To date, we have received three expressions of interest relating to the Copeland and Allerdale districts of Cumbria. Officials are in discussion with these authorities, but it remains open for other local authorities to express an interest.

Peter Lilley: Does the Minister accept that even those of us who are sceptical about the more exaggerated theories of global warming want to see rapid moves towards greater diversity of supply, less reliance on imported hydrocarbons and therefore the rapid development of nuclear energy? Is it not a disgrace that it has taken so long to get to any kind of resolution of this problem of the disposal of nuclear waste?

Joan Ruddock: We have made it absolutely clear that there should be no question of countries' saying, "Because we give overseas aid, we do not need to make additional moneys available." We have suggested that no more than 10 per cent. of existing and promised ODA should be provided for adaptation or other climate-related purposes. We consider that limit very important. There are legitimate overlaps between development and adaptation to climate change, but they are limited, and we must make them so.

David Kidney: I encourage the hon. Gentleman to help such households in his constituency by referring them to assistance such as Warm Front and other energy efficiency measures, and to the energy supplier obligation. I also encourage him to seek to ensure that they have the benefits to which they are entitled and that they receive social tariff support from their energy supplier, if possible. The answer to his question lies yet again in the deliberations of the Committee that is considering the Energy Bill, about which we have heard so much today. We do indeed intend to put the voluntary agreement for social price support on a statutory basis, and we propose to double the amount of support under that scheme.

David Kidney: Our country has the best testing facilities in the world: we have the New and Renewable Energy Centre-NaREC-as well as a facility in the Orkneys and the forthcoming wave hub in Cornwall. The specific technology to which my hon. Friend refers is either in place at, or being built in at, the Orkneys facility, with some further testing and accreditation, and it is hoped that it will be the first applicant for assistance from the marine renewables deployment fund.

Martin Horwood: Amid the general failure at Copenhagen, there was at least positive discussion about mechanisms to reduce deforestation. Is the Secretary of State content that, among the mechanisms currently envisaged, there is sufficient protection for the rights of forest peoples, who are probably the best guardians of the rain forest? Could not the British Government set a very important precedent and make a valuable contribution to this process by ratifying International Labour Organisation convention 169 on the rights of tribal peoples, as other European countries have done?

Sadiq Khan: During this period of exceptionally prolonged severe weather, staff across the transport industries and national and local highways authorities are working extremely hard to minimise the disruption caused. The Highways Agency has its fleet of 500 salt spreaders and snow ploughs out in force and has been successful in keeping the vast majority of the major road network running, helping to prevent the formation of ice and build up of snow.
	Following the severe weather in February 2009, the UKRLG-the UK Roads Liaison Group-recommended good practice of having at least six days of heavy salting capacity in the winter period, alongside a package of wider recommendations to improve resilience. The UKRLG noted that the Highways Agency was already holding a minimum of six days' continuous heavy salting capacity in winter periods. The Highways Agency entered this winter period with 13 days' capacity, and we regard this as the right response following last year's events.
	For the local road network, it is the responsibility of local authorities to decide how to respond to the UKRLG recommendations. We have kept in close contact with local authorities across the country to check how they are dealing with their own local road networks. Local authorities have told us that they increased their salt stocks at the start of the winter season compared with last year. The Local Government Association estimates that the equivalent of about 600,000 miles of road have been gritted by council gritting teams in the past 14 days, using about 38,500 tonnes of salt.
	The Department for Transport and devolved Administrations have been regularly monitoring salt supplies and stock levels across the country with the help of their agencies, local authorities and the companies that supply salt. Alongside this, mutual aid arrangements between local authorities and the Highways Agency can help to relieve areas that are experiencing particularly tight stocks of salt. The Government and the devolved Administrations have also decided that owing to the exceptional weather affecting the country, they should work in partnership to advise salt suppliers on priorities for deliveries. The LGA will assist with that process. A group started the national prioritisation work this week. That will help to ensure that stocks of salt are supplied to where they are most needed.
	We will continue to do everything possible to keep disruption to a minimum during this period of exceptionally prolonged severe weather.

Caroline Spelman: Thank you for granting this urgent question, Mr. Speaker. It is so topical that I think people would quite rightly have expected the Government to make a statement on the subject by now, but we are grateful for this opportunity.
	Councils reviewed their own contingency plans in the light of their very bad experience of the snow as recently as February last year, and sent the report I have here, "Weathering the Storm", to the Minister's Department in August. Why, then, did it take until 15 December for Ministers to respond to that vital report? Does the Minister accept that with only 48 hours to go before the first predicted heavy snowfall in the south-east, councils' ability to implement the recommendations in full was compromised?
	Does the Minister consider that the advice that he received to increase the stockholding capacity of six days' worth of salt supplies is adequate, given the prospect of at least another week of sub-zero temperatures, or will he revise the guidance to take account of the figure that he gave in his first response, which was more like 13 days' worth? If so, how soon will he change that guidance and when can councils expect to receive it? Does he accept that if the report's recommendations had been accepted earlier than 15 December, it might have been possible to avoid the gridlock of lorries around the salt mine in Cheshire that are trying to collect salt on behalf of councils? As the Minister will know, in February of last year one of the learning experiences came from the difficulty to do with the flexibility of drivers' hours. At what point did the Government act on the recommendation to provide for flexibility in drivers' hours?
	Finally, do the Government intend to revise any of the guidance they have given to councils? If so, when can councils expect to receive this and will a copy of the revised guidance be placed in the Library of the House of Commons so that Members from all parties, whose constituents are experiencing considerable difficulty, might be able to see those changes?
	I am sure that all Members would like to pay tribute to the work being done by their councils to try to keep essential roads open. They are working around the clock to keep Britain moving.

Sadiq Khan: I thank the hon. Gentleman for his sensible points and the questions that he has raised. Let me deal with each of them, starting with salt supplies. As he is aware, there are two main salt suppliers in this country, and the supply is governed by where salt can be mined or excavated. I am not sure whether he is suggesting that I should nationalise the industry or start procuring or producing salt. I can tell him that the Prime Minister has spoken to the chief executives of both those companies this morning to impress on them the importance of trying to excavate as much salt as possible and to get it out from the factories. The Highways Agency has procured salt from Spain and from companies in the USA, and some local authorities have been innovative in procuring it. There is a problem with salt storage. Some local authorities have problems with salt barns and with the amount of salt they can store for a long period of time, and so are governed by lack of storage space rather than not being sufficiently geared up to get as much salt as they can.
	On the hon. Gentleman's points about what has happened in his local communities, I must tell him that it is for local authorities and locally elected councils, which know their communities best, to decide where salt and grit should be laid down. The hon. Member for Meriden (Mrs. Spelman) suggested that perhaps we in Whitehall should have a map and decide which roads should be gritted. If there are problems in some areas, it is important that councillors make sure that the right parts of their communities are gritted. Clearly, there is a problem with the amount of grit available in relation to the extreme weather that we are having, and so priority assessments will need to be made. Those parts of the community that are a priority will need to be gritted.
	The hon. Gentleman's final point is important. The cost to us of bad weather, not only in financial terms, to business, but in human terms, with operations being cancelled and school hours being lost by children, is immense. However, the weather is, on all objective assessments, the worst that we have had for almost 30 years, and so a sense of perspective is required.

Tom Watson: Is it not the case that a small number of politicians are sitting in their warm offices e-mailing press releases to create despondency, when there are many tens of thousands of public sector workers out there keeping the country moving? Should we not be praising those workers, rather than moaning?

Sadiq Khan: I thank the hon. Gentleman for his comments, and there is not much in what he said that I disagree with. Not only do I pay tribute to the hard work done by the people at the Winsford rock salt mine, but the Prime Minister personally rang the chief executive to ask him to pass on his thanks for the great work they are doing. I should also like to thank the hon. Gentleman's constituents, who are having to put up with lorries going through their communities literally 24 hours a day. He will be aware that there are conditions attached to lorries going through the town during working hours, but local residents have indulged the trucks. There are very good reasons for people to work around the clock, and many will have seen the photographs and images of the queue of lorries leaving the factory. Although it looks chaotic, staff are doing a very important job in ensuring that the right parts of the country are receiving much needed grit.

Sadiq Khan: One of the things that I was keen to do when speaking to the LGA, the Prime Minister and some of my officials this morning was to make sure that local authorities use best practice and provide a sufficient standard of care for local residents. There are health safety issues here, as we clearly do not want more people falling over and getting hurt than would be the case without this adverse weather.
	I am reluctant to prescribe what local authorities should do, as clearly this is a matter of horses for courses. We need to make sure that the parts of communities most in need of having their pavements or roads cleared are having that done. I am happy to carry on working with the LGA and others to see whether lessons can be learned.

Sadiq Khan: I appreciate that roads are essential lifelines in rural parts of the country, and I can understand why local authorities would want to ensure that they are cleared more swiftly in future. The hon. Lady is right to remind me that there is a company in Middlewich in her constituency that is doing a huge amount of work to provide salt and grit and to make sure that supplies reach the rest of the country. She also spoke about the need for the LGA to have better plans in future, but we have to be careful what we wish for. On the one hand, local communities elect councillors and local authorities to do a very important job but, on the other, pressure is brought to bear on me, as a Minister in Whitehall, to tell local authorities what to do. I suspect that some of that could be because some of the local authorities doing a bad job are Tory councils.

Sadiq Khan: The hon. Gentleman will recognise that we have increased local authority capital investment for those matters two or three times in recent years. In fact we were criticised for doing so. The important thing is that local authorities take stock of the areas where adverse weather causes problems. He is right to say that gritting and adverse weather causes more potholes in and problems with the fabric of our roads, but it is for local authorities to know their communities best and to decide where their priorities like when it comes to spending their moneys.

Gerald Kaufman: Has my right hon. and learned Friend seen early-day motion 72, on A1 Techsol Ltd, Stockport Road, Manchester, standing in my name and the names of a number of other hon. Gentlemen?
	 [That this House condemns A1 Techsol Ltd, Stockport Road, Manchester, for having failed to return to a constituent of the right hon. Member for Gorton his UK passport, driving licence, bank statements, security officer's badge and photographs, which they required from him on taking up employment with them, and for ignoring repeated requests from the right hon. Member to return this material to his constituent; regards A1 Techsol's retention of this material as both theft and a breach of employment legislation; calls on the Secretary of State for Work and Pensions and the police to investigate; and meanwhile calls on the public to have nothing whatever to do with A1 Techsol, either as employees or in any other way.]
	Will she ask the Work and Pensions Secretary to investigate the employment practices of that rogue company, and the police to investigate it for possible larceny?

Harriet Harman: There has actually been a fall in the level of crime since this Government came into office and an increase in the number of offenders brought to justice. No one is released from prison on the basis of a lack of prison places. We have increased the number of prison places- [ Interruption. ] Actually, we have done that with finance that the party to which the hon. Gentleman belongs would have opposed. I will not raise his points with the Home Secretary or the Justice Secretary because I think they are ill-founded.

Patrick Cormack: May I thank the Leader of the House for what she said about David Taylor, who was such an outstanding Back Bencher?
	In the light of Sir Ian Kennedy's comments yesterday, would it not be sensible for the House to make its views known on his proposals so that we do not put the cart before the horse and vote on some Kelly recommendations that Sir Ian may not wish to endorse, bearing in mind that IPSA is now in control?

Harriet Harman: The problem is not the Met Office but the challenge of climate change. There is a micro-climatic problem on the Tory Back Benches, which perhaps I could refer to the Tory Front Benches.

Harriet Harman: I certainly agree with my hon. Friend. It sounds like he is suggesting something like "Ofpol" to monitor the Opposition. They say different things in different parts of the country and different things to the newspapers from that they say in the House. The one consistent thing is that none of it adds up.

Harriet Harman: I would suggest that the hon. Gentleman raise the issue directly with the relevant Ministers. I will alert them to the fact that he wants to raise the issue on behalf of his constituents and see whether he can deal with it by correspondence, a meeting or further discussion.

Philip Hammond: I shall try to match the Chief Secretary's brevity, although I came prepared for Members of the House to be a bit thinner on the ground. Evidently not all experienced the same difficulty that some of us encountered in battling through the snow to get here.
	This is the first opportunity that the House has had to debate the pre-Budget report, the last important economic statement made by the Government before a pre-election Budget which markets will rightly discount. Given the critical state of the public finances, the huge borrowing requirement that must be met, and the fragility of confidence in the United Kingdom economy and United Kingdom Government debt in particular, we would have expected the Government to use this opportunity to send a powerful and unambiguous signal to investors and lenders alike of their determination to get the deficit under control.
	Listening to the Chancellor and the Prime Minister yesterday, and to the Chief Secretary, one would think that the global financial crisis had caused the meltdown in Britain's public finances, but that is not what has happened. According to the Treasury's figures, the economic recession accounts for about a quarter of Britain's deficit-that is the cyclical part of the deficit, which economic recovery will eventually eliminate-but three quarters of it is structural, and requires a structural response. The truth is not that the financial crisis has caused the fiscal crisis, but that for many years the global financial boom masked the scale of the underlying fiscal problem as this profligate Government spent the tax receipts that were the proceeds of a series of bubbles in financial assets, and property in particular, as if they were permanent features of the economic landscape. The real structural crisis that needs to be addressed is not caused by the Government's support for the banking system, as they like to imply. In fact, none of this year's £178 billion deficit is directly attributable to support provided for the banks.
	The pre-Budget report was the Government's last chance to set out a credible path to fiscal stability, to put our economy back on the road to sustainable growth and enduring prosperity, and to ensure our triple-A credit rating. They blew that chance, and now the country knows beyond doubt that only a change of Government can deliver the economic change that Britain needs. The present Government have shown themselves to be unfit for office by shirking their task in the nation's hour of economic need.

Philip Hammond: My hon. Friend has made a good point, although it is a slightly different point from the one that the Chief Secretary was making to me. Issues relating to definition of the net debt are indeed part of what is undermining the United Kingdom's credibility in international markets.
	Divided Governments are weak Governments. In the run-up to the pre-Budget report we saw acrimony and division within this Government, and since the PBR some may have noticed a degree of continuity in that trend. We have observed the Schools Secretary and the Chancellor playing cat and mouse with each other in public over the education budget, the Work and Pensions Secretary accusing the Chancellor of "astonishing" mistakes-I wonder where she got that idea from-the Health Secretary insisting that his budget would be protected, the Transport Secretary implying that he would resign if the railway capital spending was cut; and, all the time, the Chancellor's options being narrowed by the manoeuvring of the Prime Minister and his allies-or perhaps I should say "ally"-intent on creating political dividing lines rather than solving the underlying fiscal problem.
	Yesterday the Deputy Prime Minister, in what was billed as a speech reasserting his support for the Prime Minister, instead comprehensively undermined the Prime Minister's economic strategy, making it clear that he, at least, understands that economic recovery cannot be built on more borrowing and more public spending-hence his decision to let it be known that he was "incandescent" about the content of the pre-Budget report.
	Following those internal semi-public debates within the Government may be great fun for Opposition politicians and journalists in the Westminster village as they seek to identify the winners and losers of each round, but the real losers are the people of Britain and the only winners are the hedge funds, which are quick to spot weakness and indecision and which are now openly speculating against our currency and our sovereign debt.

Philip Hammond: I will not at the moment.
	The pre-Budget report was, as I said, the Government's last chance to turn this situation around and to restore Britain's reputation and credit-worthiness. It needed to do two things: first, to put in place a credible plan to restore fiscal balance, and secondly to demonstrate the political courage to implement it, instead of merely talking about it. The Government failed on both tests. The plan that the Chancellor set out has reassured no one. It was immediately attacked by business leaders, economists, market analysts and commentators. Richard Lambert, director general of the CBI, said on 9 December:
	"The Chancellor has made a serious mistake imposing an extra jobs tax at a time when the economic recovery will still be fragile...He has also missed the opportunity to increase the UK's credibility by reducing the public deficit earlier."
	David Frost, of the British Chambers of Commerce, said that the national insurance rise is
	"Terrible news...It's an additional cost for business when they can least afford it."
	The PBR was slammed by economists for being driven by politics, not by economics, with widespread agreement that the failure to produce a credible plan to tackle the deficit leaves Britain vulnerable to higher interest rates and a downgrade of the sovereign debt rating, which I assume is something that the Government will be concerned about.
	The right hon. Member for Holborn and St. Pancras will be pleased to hear that I am going to quote Michael Saunders at Citigroup, who is one of the City's most respected economists:
	"The PBR appears to be aimed at reviving Labour's core support rather than seriously tackling the UK's medium-term fiscal problems...These measures do little or nothing to alter the medium- and longer-term fiscal outlook."
	Let me give the right hon. Gentleman a few more examples. Barclays said:
	"The PBR is unlikely to dispel concerns about the UK's public finances...The government has demonstrated that it is willing to raise taxes to fund extra spending, but not that it is willing to project a more aggressive overall tightening in policy".
	Nor were analysts impressed by the Chancellor's forecasts, upon which even his modest plans for fiscal consolidation depend. BNP Paribas said:
	"The Chancellor's new forecasts also continue to look massively over-optimistic".
	Morgan Stanley said that
	"the Treasury's forecasts for GDP growth, particularly beyond the next couple of years, still look optimistic to us."
	Citigroup, again, said:
	"The revenue forecasts...look over-optimistic."
	RBS said that the Treasury has been consistently too optimistic on how much tax revenue
	"a given amount of GDP growth generates".
	All of this leaves us exposed to higher interest rates, of course. Citigroup has said:
	"We suspect that as this budget is digested, gilts and sterling will react badly."
	RBS said:
	"Issuance remains at historically highly elevated levels and this is seen forcing yields higher in a post QE environment."
	The soaring national debt threatens a credit rating downgrade.
	Barclays-

Philip Hammond: I will give way to the right hon. Gentleman shortly, after I have finished reading out these reactions and responses to the PBR.
	On the afternoon of the PBR, Barclays said
	"the UK's triple-A sovereign credit rating and the currency are likely to remain vulnerable."
	BNP Paribas said:
	"Given that the Government has decided to ignore the opportunity to take steps to remove the risk of a sovereign rating down grade we expect sterling to remain under pressure over the medium term."
	The bond-rating agency, Moody's, said that the PBR plans
	"stretch to the limit...what is consistent with a top rating."

Liam Byrne: The hon. Gentleman is enormously kind in giving way. Does he acknowledge that Standard and Poors have said:
	"We believe that the ratings on the UK continue to be supported by its wealthy, diversified economy"?
	He will also recognise that Fitch said "The UK's triple A rating remains supported by its high value added, diversified economy." He will recognise, too, that Moody's has said that "the outlook for the UK Government is stable. Her Majesty's Government is deemed a resilient triple A issuer." The hon. Gentleman's presentation would be incomplete without such an acknowledgement. Would it not be incomplete, too, without an acknowledgement of the Governor of the Bank of England's growth forecast for 2010-11 of 4.1 per cent., which is much higher than the rate the Chancellor offered?

Philip Hammond: I am going to make a bit of progress before I give way.
	At the time of the pre-Budget report, the Chancellor told us:
	"For as long as extraordinary uncertainties remain in the world economy, this is not a time for a spending review."-[ Official Report, 9 December 2009; Vol. 502, c. 368.]
	However, to be credible the pre-Budget report needed to be accompanied by a comprehensive spending review or at least by a clear allocation of departmental spending totals for 2011-12 and 2012-13. Having told us that he could not provide that, he went on to tell us that he was guaranteeing most of the NHS budget, the schools budget and the police budget.
	The Chief Secretary to the Treasury has recently refined this argument, with the proposition that the Government can confidently predict that we will come out of recession at the turn of the year and that economic growth will be 1.25 per cent. in 2010 and 3.5 per cent. in 2011 and every year thereafter, and can set an overall envelope of public spending in specific budgets for health, for schools and for the police-that is about 40 per cent. of resource departmental expenditure limits-but cannot allocate spending totals to the remaining Departments because they do not know what the level of unemployment will be.
	Yesterday, the Labour-dominated Treasury Committee said the following about that astonishingly selective forecasting capability:
	"It may be difficult for any current consolidation plan to command universal support. It will therefore be very important to add greater detail and clarity to the plan sooner rather than later."
	It went on to say:
	"There is a sense that the Treasury are using uncertainty to suit themselves"-
	by producing some forecasts as far as 2017-18 but no spending details beyond 2011. The Committee Chairman, the right hon. Member for West Dunbartonshire (John McFall), from whom we will hear later, added his thoughts in the covering press release, saying:
	"We consider clarity, even if it is clarity about the degree of uncertainty surrounding the forecasts, as essential to strengthening this crucial credibility."
	In addition, the Committee stated that it could
	"see no good reason for the Treasury failing to produce"-
	more detailed-
	"illustrative figures for future expenditure".
	We are being asked to accept that the Treasury can forecast growth, set spending totals and allocate funding to Departments that will grow, but that there are compelling and overriding reasons why the Government cannot allocate funding to the Departments that will shrink-and shrink they certainly will. It has been widely reported that there is an internal Treasury analysis showing that those Departments not fortunate enough to enjoy the political patronage of the Prime Minister will face a 17 per cent. real-terms spending cut over three years. That would confirm Institute for Fiscal Studies analysis suggesting a 16 per cent. cut-or 19 per cent. if the ring-fencing is extended for a third year.
	That contrasts sharply with the Chancellor's words on the "Today" programme on 10 December, when he said:
	"Spending is going to be pretty much flat...Broadly speaking...we're assuming for the non-protected services it's going to be pretty much flat".
	That was in nominal terms, but even after allowing for inflation, it is a long way from a 17 per cent. real-terms cut. He was asked on Monday to deny the existence of that Treasury paper setting out the reality of 17 per cent. cuts in all other Departments, and I asked the Chief Secretary twice on Tuesday to deny the existence of that internal paper, but neither of them could do so. Instead, they got their civil servants to engage in producing costings of a bunch of fantasy policies, which Labour party officials then worked into a dodgy dossier-that fell apart even more quickly than the pre-Budget report did.
	So let me ask the Chief Secretary now-I will happily give way to him-whether the Government are going to address the biggest gap in their credibility by publishing a comprehensive spending review or departmental spending allocations for 2011-12 and 2012-13 before the general election. Will the electorate be told how the Government plan to deliver the fiscal consolidation that they have set out in aggregate in this pre-Budget report and that they claim is the proof of their commitment to restoring fiscal discipline? Or will we have to guess?

Andrew Pelling: As the hon. Gentleman is surely going to be in charge of these issues in May, how will he approach the issue of the triple A rating? What will he be willing to sacrifice in the Budget in defending the triple A rating? Does he think that there are some things that he will definitely want to keep, even if the rating were to be downgraded to double A plus or double A1?

Philip Hammond: The facts are right, but that has happened precisely because of the intervention that has been made by the Monetary Policy Committee of the Bank of England in lowering interest rates very rapidly to unprecedented low levels and in keeping them there. I look forward to hearing what the Chairman of the Select Committee has to say on that in due course.

Philip Hammond: For the hon. Gentleman to shake his head is simply disingenuous.
	On the big test of the PBR-that is, the restoration of economic and fiscal credibility-it was a resounding failure. Markets were dismayed, the deputy Prime Minister was incandescent and it was not much of a crowd pleaser either. I shall spare the House the list of quotations from various newspapers on the day following the PBR. It is astonishing that the Chancellor not only failed to begin the process of cutting spending but announced a further increase in public spending and financed it by slapping an extra tax on everybody who earns more than £20,000 a year by raising employee national insurance contributions. They will now go up by a total of 1 per cent., costing someone on £30,000 an extra £200 a year and someone on average earnings an extra £60 a year.
	There is a similar burden on employers at a time when we are trying to create jobs. The Institute for Fiscal Studies has made the obvious point that employee and employer NICs are the same tax. Both are incident on wages, so anyone who earns £14,000 or more a year will be hit by Labour's double tax whammy on employer and employee NICs. The Prime Minister is determined to fight the coming election on a class war battlefield, but it seems rather strange to start by feeding the Chancellor's spending addiction with a tax that impacts on the millions of decent, hard-working people in this country who earn £14,000, £15,000 or £20,000 a year. If we win the general election, our No. 1 priority will be to try to avoid Labour's new national insurance tax increases on the many.

John McFall: I do recall that being mentioned, but I also recall that youth unemployment was mentioned as well. Like the pensioners, that is a really big issue for us.
	The Treasury Committee also felt that the PBR did not provide enough information on how the structural deficit will be reduced. Because of that, we believe that the Government must bring forward a clearer and detailed plan. As has been mentioned, that should happen sooner rather than later, and this issue certainly needs to be tackled after the next election. We also feel that the Treasury could provide more quantitative information on the public finances. As the shadow Chief Secretary to the Treasury has said,
	"there is a sense that the Treasury are using uncertainty to suit themselves."
	The PBR gives some forecasts to as far ahead as 2015, and illustrative projections to as far ahead as 2018, despite any worries about uncertainty. It could therefore be considered arbitrary that the Treasury fails to produce projections of future expenditure, or at least of the split between departmental expenditure limits and annually managed expenditure.
	The Treasury must also provide more quantitative information on the risks around its forecasts for the public finances, given the degree of uncertainty surrounding them. We realise that the Fiscal Responsibility Bill will tie the Government into a fixed time scale for managing the deficit. The fact that that will require close parliamentary monitoring makes transparency all the more important.
	The Committee notes the risk, however small, of another uncovered gilt auction and yields rising. Quantitative easing is slowing, and there will still be large gilt auctions in 2010-11. However, we also note the methods now employed by the Government to reduce the risk of uncovered auctions, and welcome the fact that there have been no further uncovered auctions since our Budget 2009 report.
	The Treasury Committee report, like many earlier reports, also mentions child poverty. As a Committee, we remain convinced of the continued importance of the commitment to eradicating child poverty, despite the difficult economic circumstances.
	Given the recent slowdown in progress on the child poverty targets, and the likelihood that this year's target will be missed, it is vital that the Government set out a credible plan to tackle child poverty, going forward. It is vital that the Government set out the steps that they propose to take to achieve the 2010 target, and to achieve the elimination of child poverty by 2020-a very bold but also a very proud manifesto commitment in 1997.
	I turn now to the question of the bank payroll tax. The Treasury Committee has been at the forefront in calling for change in the culture of banking, but estimates suggest that the Treasury now expects to receive about £3 billion or £4 billion from the tax when it originally expected only £500 million. That shows that the banking culture has not changed-that banks have simply gone ahead and paid out the bonuses. That is hugely important, because there is public anger about this matter. People are not fooled, and they realise the extent of the bank bail-out. I made that point yesterday to the Economy, Energy and Tourism Committee of the Scottish Parliament, when I was giving evidence to its inquiry. It is important that we remind ourselves of that.
	The Treasury purchased £37 billion of shares in RBS and the Lloyds Banking Group; it gave indemnity to the Bank of England for £200 billion of quantitative easing; it has also agreed to guarantee up to £250 billion of wholesale borrowing by banks; it provided about £40 billion of loans and other funding to Bradford & Bingley and the Financial Services Compensation Scheme; and it insured banks' assets to the tune of £280 billion. The National Audit Office, in a recent report, suggested that the net cash outlay for the purchase of shares in banks and the lending to Northern Rock will be about £117 billion, with a gross outlay of £131 billion. As a result, the Government's commitment to banks is 60 per cent. of GDP, and the value of that is 83 billion working days. The consequences for the UK are stark, but so are the consequences for the world. The International Monetary Fund says that 10 per cent. of global GDP will be lost for ever as a result of the banking crisis.
	The banking crisis, which prompted the financial crisis, is at best halfway over. The IMF estimates the total non-performing assets in the world to be worth $3.4 trillion, of which only $1.7 trillion has been written down. So a second bank bail-out will not be tolerated in the United Kingdom or in other European countries. I have visited Germany, Austria and Belgium in the past few weeks, and I got that message. It will also not be tolerated in the United States, which I visited, too. Now is the time to fix the banking system, and I think that we have four to five years to change the financial architecture. That is why the Treasury Committee announced a few weeks ago that it would be undertaking an exercise on the "too big to fail" issue, which seemed to be brushed under the carpet last March, but has since been revived.

John McFall: I am saying that the Government have taken some action in that area. I am sure that the hon. Gentleman, who sits on the Conservative Benches, believes in markets and free markets, but does he want Governments interfering in every single decision? I do not think that he does, so philosophically he will have to come to terms with the issue.
	It has been proved that there is now no such thing as a free market, particularly in the banking sector. The Governor of the Bank of England came before the Committee and made this very point. It is a one-way bet for the banking system: if people do well, they get big rewards; if they do badly, they get big rewards. The Government need to go further on the issue of incentives in the banking system, because the incentive structure has distorted the long-term health of the banking institutions. People have had short-term returns but long-term instability. That is why we have joined with all these eminent people such as Mervyn King, Paul Volcker and Nicholas Brady; no doubt I will add the hon. Member for Windsor (Adam Afriyie) to that list next time I speak on this issue.

Vincent Cable: We have had two debates on the economy this week. I judged, wrongly, that this would be the centre of attention, but the Chancellor and the shadow Chancellor clearly took a different view. Nevertheless, I persist in my belief that this is an important debate, for several reasons. First, it centres on the pre-Budget report, which was a very important event, however we judge it. As the Chairman of the Treasury Committee pointed out, the debate represents an advance, albeit a small one, in parliamentary accountability, because it represents an acceptance that the PBR should be subject to debate. Moreover, we now have access to the Treasury Committee's review of the PBR, which we did not have on Tuesday. There is therefore a lot to discuss today that we were unable to discuss properly then.
	I want to say something about the deficit and the controversies surrounding it; something about the issue that dominated the PBR but has now largely been forgotten-the banking tax, and what has happened to it; and something about the long term, because we are very preoccupied with the short-term fiscal position. There was an interesting half one-liner in the PBR about the creation of an infrastructure bank and a vision of how the economy could develop in the very long term, and we need to refocus some of our attention on long-term structural issues.
	I start with the deficit. This debate has been a good deal less emotional than bits of the one that I heard on Tuesday, in which the right hon. Member for Birkenhead (Mr. Field) among others proclaimed that the fiscal crisis was comparable to the crisis in 1940. Other speeches were at a similar level of emotion. Today everybody has been a little bit calmer, but we clearly have a serious problem and it is helpful to start by stating what the deficit problem is.
	There are two linked problems: a deficit or borrowing problem and a debt problem-a cash flow problem and a balance sheet problem. The problem of debt and the balance sheet is clearly serious, because the situation is deteriorating rapidly. However, as is often pointed out from various parts of the House, as things stand the level of British public debt in relation to the economy is actually one of the lowest in the developed world and much lower than at various periods historically.

Vincent Cable: Perhaps I can anticipate the hon. Gentleman's intervention. I know he believes that there is a measurement problem, and that if we measured public debt differently we would come up with much higher figures. I am merely citing the international conventions of the OECD and the International Monetary Fund; he might have something to add.

Liam Byrne: The hon. Gentleman is making an excellent speech, but I think it would be useful at this point in the debate, since we have heard from the Government and official Opposition Front Benches on this subject, to ask him whether in his judgment the reduction in the deficit in the first year of the Government's plan should be faster, or whether the Government have broadly judged it right?

Liam Byrne: The hon. Gentleman will accept that a judgment has been made about the right level of deficit in the next financial year when the economy will still be growing at a rate below trend. In the subsequent year, there will be a sharp fiscal tightening, but that will be at a time when the economy will be growing at above trend. There is an element of judgment involved, and the Government have made a decision about the right level of deficit commensurate with the forecasted level of growth in the economy.

Vincent Cable: I am sure that that is right: the extent and timing of the fiscal contraction have to reflect the state of the economy. I have suggested five tests that might be used to ensure that, one of which is-obviously-the rate of growth. Another is the growth of unemployment. Another one has to be the state of the borrowing markets.
	I hope that the Government are right about the expectations of economic growth. I hope for rapid economic growth because hundreds of thousands of people's jobs hinge on it, but one has to be realistic: an awful lot of factors are holding back growth, and are likely still to be doing so in a year. Private consumers are unlikely to embark on another spending splurge when they are heavily in debt. We have an underlying problem that British consumer debt in relation to the economy is the largest in the developed world, and certainly the largest in our history for a very long period. It would be surprising-and probably unwise, in many cases-were people to rush out and start spending.
	Private sector business investment is unlikely to take off rapidly. There is an enormous amount of spare capacity, but as the Chairman of the Treasury Committee just reminded us, there is a severe credit squeeze. That will be even more the case once we enter a period of expansion, because the banks are over-reacting to the crisis and not lending to sound British companies. We will not get any growth from public spending, whether consumption or investment. The entire expectation of economic growth rests on exports, but actually they are a relatively small part of the British economy. It will require a near miracle to achieve the kind of growth for which the Government, and indeed all of us, hope. Frankly, we have to be realistic about that.
	I want to comment on two other aspects of the PBR that have not today received the attention they probably should have done. One is the Government's tax on bank bonuses, which was put together in a hurry. Given that it is a fairly short-term tax, I hope that, in the conclusion to the debate, the Chief Secretary or his colleague, having had a month's reflection, can summarise what, in their judgement, has been the impact of the tax. Furthermore, how are they meeting some of the criticisms that have been thrown at the tax, of which there have been several? The first was advanced from the Liberal Democrat Benches. We were very sceptical about the ability of the tax to capture bank bonuses because of the numerous opportunities for potential avoidance, through multiple payments of bonuses, payments in salary and payments in kind, and it would be useful to have an assessment of how far the Government think they have plugged those various potential holes.
	Secondly, the Government themselves argued that the main purpose of the tax was to change the behaviour of the banks, to discourage them from paying out bonuses and to encourage them to build up their capital reserves. Are the Government in a position to estimate how much capital reserves will be changed-improved, from the Government's standpoint-as a result of the measure? It was all done in a hurry and we did not get much analysis at the time. Can the Government now tell us what they think?
	Thirdly, we are being told by the banks themselves, rightly or wrongly, that they are all now stumping up the money, that they are paying it and that the Government will receive a lot more than £500 million. What is the current estimate of the amount of money that will be raised? Finally, over the holiday period, we heard many rumours and much speculation about banks running off to Switzerland and other places because they object to paying this high tax and other things. I suspect that much of that is rhetoric and an attempt to blackmail the Government.

Peter Lilley: It is always a pleasure to follow the right hon. Member for Holborn and St. Pancras (Frank Dobson), if only because it reminds us how far the rest of us have moved on over the past couple of decades. I hope that he will forgive me if I do not return to fight the old battles, which he enjoys fighting even though he lost. I see no need to re-fight them, because we won.
	I have found that I can begin almost any speech on any subject, and I do, by reminding people of the slogan that Bill Clinton used to have above his desk to remind him of what was really important: "It's the economy, stupid." As we are focused on the economy today, we need another sign above our desks saying, "It's the deficit, stupid" and below that perhaps another one saying "It's public expenditure, stupid." Unless we focus on getting a grip of public expenditure and on eradicating the deficit more rapidly than the Government want, we will not get the economy of this country right. The supreme weakness of the pre-Budget report-some of us may have forgotten that we are supposed to be debating that today-is that it does not focus on those things. One has to get more than halfway through the overview at the front before there is even the coyest of mentions of the deficit:
	"The Pre-Budget report announces action to maintain the path of fiscal consolidation".
	It goes on to say that the three measures that maintain the path of fiscal consolidation are all tax increases. That is how the Government see the priority of solving the deficit. The report refers to public expenditure only in the last sentence, when it mentions that the Government plan is to embed
	"in legislation through the Fiscal Responsibility Bill"
	their measures to halve the deficit. The substitute for action, as far as the Government are concerned, is the deficit-reduction Bill. We debated that at length on Tuesday. I did not have a chance to participate then, so I hope I will be forgiven for saying now why I consider that Bill to be a mistake.
	First, it is obnoxious in principle to try to bind future Parliaments. That cannot be done in practice by passing a law, but time and again this Government try to bind future Parliaments by passing legislation that has a bearing on what future Governments must and must not do. Secondly, the Bill is a nonsense. It is not even legally enforceable. It is not even judiciable; it is one of those rare Bills that actually has a clause that effectively says that the courts may not take note of the law incorporated in it. It is imprudent, too, because it seeks to bind, albeit unenforceably, future Governments to follow a particular path when we cannot be sure what things will be like over the next four years-let alone the next eight or 10 years, as the Bill envisages. I think that we should probably pursue a fairly ambitious path, but it is foolish to try to lay down a law on what needs to be done in future. The Bill is also a displacement activity; it is a substitute for action because the Government want to avoid action and facing reality.
	What is most wrong with the Bill, however, is that it is a recipe for delay. St. Augustine said, "Make me chaste, O Lord, but not yet" and St. Alistair says, "Make me fiscally responsible, but not until 2011." At least St. Augustine saw himself ultimately becoming chaste, but the Chancellor and the Prime Minister are probably passing on the task of fiscal responsibility to their successors, rather than to themselves.
	I believe that it is better to act sooner than later, because there is a positive benefit in doing so. If we act sooner in taking steps to get the deficit under control, that will restore confidence; and with confidence, growth will come-and with growth, jobs will come, not least for our young people who are currently languishing on the dole queues at the very start of their careers.
	There is also danger in deferring action on the deficit in that every month we do so the risk increases of our having a sovereign debt crisis and a financial collapse. That would mean higher interest rates, which would not only make controlling the deficit less easy, but hit all those people with mortgages. One thing about this economic downturn is that at least there is a section of the community that is reasonably well off, and in some cases better off, because interest rates are low: the mortgage payers of this country. They face the greatest threat from this Government's refusal to tackle the deficit speedily and strongly, because it is their interest rates that will increase.

Peter Lilley: My hon. Friend is absolutely right. If we leave this too late and as a result there is a crisis, we will have to take much more brutal action: instead of companies simply not recruiting, they will have to sack people; instead of voluntary redundancies, there will be compulsory redundancies. That will be the inevitable consequence of taking too long over implementing the measures that we need to take to bring the deficit under control.
	The Chief Secretary said that worries about major holders of Government bonds selling their bonds were overstated. He said that PIMCO was selling bonds because it was looking for riskier assets elsewhere. He must be the only person who thinks that PIMCO and other bond holders are selling UK bonds because they think that they are not risky enough-because they think that the Government's finances are not putting us in sufficiently great danger of bankruptcy. The truth is that they are selling them because they think that the price does not yet fully reflect the risks and dangers of financial collapse. They know that if that happens there will be higher interest rates, and they would prefer to buy them back then rather than experience the collapse in the price and rising interest rates while still holding them.
	The Government argue that withdrawing the fiscal stimulus too soon will risk provoking a double-dip recession. That is wrong for several reasons. The first reason is that it is an argument for never taking action. If withdrawing the supposed stimulus has a negative impact, it will do so next year, the year after or the year after that; after all, it was several years after the recovery had begun that the double-dip recession occurred in the United States in the 1930s. That was not because action was taken in the first or second year of the recovery; the action was taken three or four years later, in 1937. Like a lot of the arguments that the Government put forward on many of their policies, it is an argument for not doing anything.
	The second reason is that the stimulus effect of a deficit is grossly exaggerated. This country has a bigger deficit than almost any other comparable country in the world, yet it is the last to come out of recession, so there has not been a vast stimulative effect. Likewise, its removal will not have a vastly depressive effect.
	The third reason is that the Government's argument ignores the fact that the effect of action to get the deficit under control on improving confidence far outweighs the impact of the loss of Government expenditure feeding into the economy if the fiscal contraction and consolidation takes place sooner. The fourth reason is that we are dealing with a structural deficit, and the way to tackle that is to make structural changes, which takes time. If we do not start thinking them through and implementing them now, we will not get the benefits until it is too late.
	So, there are sound reasons in principle for disagreeing with the Government's view that there is a great danger in starting the process of fiscal consolidation at the first possible opportunity, and there is plenty of evidence in practice. We have seen Governments do this before. This country has previously started the process of fiscal contraction before the recovery has been long established. In 1976, the Labour Government did just that-they had to, because the International Monetary Fund told them to do so. At a recent seminar in the City, players in those past crises revealed that Jim Callaghan was quite keen to do it anyway and found what the IMF said to be a useful excuse. Lord Donoughue, the head of his policy unit at the time, said that having argued internally and with the IMF about whether they could avoid taking such action, they were struck by the fact that when they did so renewed growth in the economy came much more rapidly and strongly than they had anticipated and that the effect was positive, rather than negative.
	In 1981, the Conservative Government took such action. Some 364 economists wrote to  The Times saying that any attempt to reduce the deficit at the bottom of the recession would turn that recession into a continuous downward spiral from which there would be no hope of recovery. Almost from the day that their letter was delivered and published in  The Times , and, simultaneously, Geoffrey Howe-now Lord Howe-introduced his Budget, the economy started to recover. The effect on confidence outweighed the direct Keynesian effect.
	Plenty of evidence from overseas supports what I am saying. An excellent study that I have mentioned before in this House-I have still seen no evidence to suggest that the Government have yet read it-has been produced by the European Central Bank. Its occasional paper series No. 38 "Economic reactions to public finance consolidation: a survey of the literature" is very revealing. It reveals that on many occasions the effect of reducing Government spending, and even sometimes of raising taxes, in order to produce fiscal consolidation is positive. It states:
	"The issue attracted much renewed interest in the light of the experiences of fiscal consolidation in Denmark (1983-86) and Ireland (1987-89). In spite of the severe restrictive policies pursued in the two countries during the periods concerned, their rates of growth showed significant increases on previous years."
	There was also a study of some 18 OECD countries over the last 30 years of the previous century which showed a range of expansionary and contractionary episodes. The conclusion was:
	"The effect of fiscal policy therefore becomes non-Keynesian"-
	that is to say that a contraction of the deficit produces expansion of the economy-
	"when large and persistent budgetary adjustments are implemented."
	That is precisely the circumstance that we find ourselves in today. By contrast, another study mentioned in the document considered five rather similar OECD countries: Australia, Canada, Germany, the United Kingdom and the United States. It concluded that
	"the effects of fiscal policy on GDP and its components"
	have tended to
	"become substantially weaker over time"
	and that since 1980, the
	"effects have been mostly negative".
	In other words, a contraction in the deficit produces a sufficient return in confidence to produce expansion in the economy.
	So, we have the evidence to know that we ought to be taking action now. The sad truth is that we have a Government who are unable and unwilling to face up to reality, who are putting their party political interest before national interest, who are using tired economic dogma against actual experience that has been studied and seen to operate on the ground, and who make easy promises before the election, leaving tough choices until afterwards.

Michael Meacher: What has been rather depressing about listening to the speeches of Opposition Members is how exclusively they seem to be concerned about the interests of the financial markets and how little concern they appear to have about the wider interests of the people of this country. All this is rather like a double-take of the Geoffrey Howe Budget of 1981, to which the right hon. Member for Hitchin and Harpenden (Mr. Lilley) has just referred. That Budget decimated the industrial economy and, as my right hon. Friend the Member for Holborn and St. Pancras (Frank Dobson) has said, produced a lower rate of growth over the relevant period than in the preceding period of the 1970s, which was extremely difficult because of hyper-inflation due to oil prices. It is rather tragic that minds seem to be closed to the idea that there are alternative ways of dealing with the deficit that will not be so socially destructive and that could be more effective in the long run. That is what I want to discuss.
	I shall focus on one crucial aspect of the pre-Budget report, which has had a little attention today but which has not been properly faced up to: the Treasury's assumptions about growth over next year and the year after. The Chancellor's view, as he expressed it, was that the worst is over. As we all know, the contraction of 4.75 percent. in 2009 is a post-war record and borrowing this year is on course to reach a peacetime record of 12 to 13 per cent. of GDP, yet the economy is forecast to rebound by 1 to 1.5 per cent. this year, rising to 3.5 per cent. in 2011-12. That would enable the Government to achieve their target of halving the deficit within four years, without the savagery of the full cuts that the Tory are clearly planning if they were to win the election. That projected growth is absolutely crucial to the PBR strategy but where is it going to come from? That is my question.
	It is true, of course, that there are some real signs of recovery. They include the unprecedentedly fast turnaround of financial markets, which some say has never happened so quickly in 300 years. The assumption is that somehow that will drag the real economy up behind it, but that remains to be seen. Other factors are the slowing in the increase in unemployment, which is very welcome, the lower rise in home repossessions than in previous downturns, and the greater support for youth employment brought about by the Government's present expenditure of £5 billion on job placements for 18 to 24-year olds and the increase in training and apprenticeships. However, my question remains: all that is important and useful, but will it add up to a huge surge in growth to 3.5 per cent. within two years?
	In the boom years before the crash in 2007, household consumption contributed 1.75 per cent. of growth each year, with business adding about another 0.25 per cent. for a total of 2 per cent. That, of course, was in the fat years but now-after the worst recession since the war, the collapse of large elements of the banking industry, a big drop in house prices, a record fall in investment and with tax rises and spending cuts being promised by all parties-the Treasury is looking to household spending contributing 2 per cent. to growth in 2011-12, and to business adding another 1 per cent. I simply ask again whether that is credible.
	Unemployment is still expected to rise to 2.8 million, and family budgets remain tight. Pay cuts, pay freezes and short-shift working are still spreading across the country. I ask again: where is growth on a sufficient scale going to come from?
	In my view, the essential element missing from the PBR is a major injection of demand in the public sector. The private sector will not provide that demand, because there is no prospect of profitability until there is a much more visible turnaround in the real economy. Quantitative easing even of £200 billion has not provided the necessary level of demand up to now, as the banks have used the money not to increase lending to struggling businesses but rather to consolidate their balance sheets. In any case, we understand that the Bank of England seems minded to call a halt to quantitative easing once gilt purchases hit £200 billion in February.
	Moreover, the injection of demand that we need will certainly not come from private consumption because, as we all know, the level of consumer debt is not far short of the whole of GDP. So the only way to inject the necessary demand into a very weak and fragile economy is through massive public investment in job creation: not £750 billion, which was spent bailing out the banks; and not £200 billion of quantitative easing, which has been much less effective than expected. A fraction of that could be used to underpin large-scale job creation in sectors where it is desperately needed, such as house building.
	There are 12,000 people in my constituency alone on the waiting list for a house, and I am sure that the situation is much the same throughout the country. House building is at its lowest ebb for 80 years, and with a recession that is an extraordinary combination. We need such investment for the restoration of our creaking infrastructure and to blaze the way for the new green and digital economy, which I think all Members agree is where the future lies.
	Why do the Government not make that investment? I suspect that it is because they came into office committed, after the Thatcherite monetarist years, to a complete repudiation of Keynesian demand management. The Opposition absolutely share that view, but I had rather higher hopes for the Government. We certainly heard that view in the speech from the Opposition Front Bencher, the hon. Member for Runnymede and Weybridge (Mr. Hammond). The story is well known, but I am embarrassed to recall that in 1997 the then Chancellor, the current Prime Minister, said that he was pursuing a regime of neo-classical endogenous growth theory. Shorn of the unfortunate terminology, it means that demand should be generated by the enhancement of supply within the economic system: from education, improvements in training, increased research and development, which is necessary, the commercialisation of science and so on. That, combined with Friedman's quantitative money theory, which was prevalent in the 1970s, certainly provided the basis for Mrs Thatcher's macro-economic policy. It is a quixotic, old-fashioned and perverse Tory theory, and regrettably-very regrettably-new Labour took it over wholesale in 1997.
	The policy works fine when other vigorous, external sources of demand such as strong export demand from other countries, major technological breakthroughs or continuing private sector investment are in place to drive the economy, as they were in the boom years of 1994 to 2007. The policy works disastrously when there are no strong external sources of demand, as there were after the infamous 1981 budget, which over the next four years pushed unemployment up to 3.2 million; and as there are now, after 2008, when unemployment is still heading towards 3 million and when even the type of fiscal expansion that in 2000 countered the downturn from the dotcom collapse is not possible because of the budget deficit. If there was ever a time for Keynesian measures to restore demand in a very fragile economy, it is now.
	The black hole in the PBR is not the opaqueness about where the cuts will fall, as the Opposition have repeatedly taunted, but the lack of any action to create the 500,000 to 1 million jobs that the economy desperately needs. Of course, the enormous budget deficit must come down; we all agree about that. But it is far better to do so by getting people off unemployment and housing benefits and back into work, where they start contributing to income tax, national insurance and VAT. The alternative, of rapidly making drastic cuts in public expenditure, clearly appears once again to be Conservative policy-but probably on a greater scale than any of us have yet realised. However, that could well have the opposite effect of turning a deep recession into a vicious spiral of decline, and prompt an even worse double-dip slump.
	That is exactly what happened in Japan in the late 1990s, when after a lost decade the Government increased public expenditure but also increased taxes. They did that prematurely and suffered the consequences of another lost decade. It was the same when Roosevelt came to office. He was a balanced-budget man, but he saw the plight of the country and got expansion going with the new deal. By 1935, two years later, there was an improvement-an expansion-in the economy, but at that point he started to raise taxes and the United States went into a fairly serious further decline from which it did not escape until the war.
	Of course, it will be objected that with the deficit as high as it is, we cannot afford to increase it any further, but that is simply not true. Our current debt-to-gross domestic product ratio is 61 per cent.-slightly higher, I agree, than that of France and Germany, but less than in the United States, where it is 69 per cent., or Italy, which is perhaps not the best example, where it is 102 per cent., with Japan still on 107 per cent.

Richard Spring: I congratulate the right hon. Member for Oldham, West and Royton (Mr. Meacher), who asked exactly the right questions-how can we stimulate demand and get confidence back into the economy? We differ, however, on how to resolve it. A bloated public sector, which is already extended, is certainly not the way forward, but his central point was correct.
	There are two groups of key questions that must be asked when considering the pre-Budget report. First, what is the present and future state of the economy, is it acceptable to the capital markets and what are the threats that are facing it? Secondly, does the PBR do anything to resolve the economic mire into which we have fallen? The answers are that the economy is in a far more perilous state than the Chancellor indicated in the PBR, and that the PBR has if anything made matters worse.
	Our whole economic system is based on confidence-confidence that the currency will be stable and that what we can buy today will be the same tomorrow, confidence that a job will not be taken away and confidence that an overdraft or bank loan will be there when it is needed. That confidence keeps money flowing around the economy and keeps people in work, businesses alive and factories producing. The central question is whether the PBR has done anything to improve that confidence. Has it dealt with the real risk of a strike by the purchasers of our debt, and what would that do to our economy? Equally, has it dealt with what will happen if and when interest rates begin to rise in both nominal and real terms as quantitative easing comes to an end? Of course the £4 billion that was sold yesterday in the gilt markets for 2015 and that fact that that went well is undoubtedly good news, but investor sentiment will be tested again next week for the year 2049 and far beyond, so there is still much to be concerned about in that regard.
	At the heart of the answer to all those questions is whether the fiscal policy for the next 12 months will be credible. Our ability to borrow is the key to the market's judgment about that and will determine the outcomes in the economy, from how much and in what terms we can borrow to how much individuals can spend. The whole object of policy should be to keep the fiscal reins sufficiently restrained so that interest rates can stay as low as possible for as long as possible. That is not what we received in the PBR-it is as simple as that.
	In the PBR, the Chancellor talked about the deficit as a percentage of GDP rising to 12.6 per cent. this year. Very regrettably, that may be an underestimate. The Economist Intelligence Unit believes that the figure will be more like 14.5 per cent., by far the highest in the list of 43 countries that it monitors each week. The Government's ambition is to cut their deficit in half. When viewed in the context of any borrowing record before 1997, that makes the current forecast look unrealistic in the medium term, because it is based on some very optimistic growth assumptions. On top of that, the Treasury Committee yesterday said that
	"although the Treasury believe the Pre-Budget Report contains sufficient detail about the way in which the structural deficit would be reduced, our expert witnesses all criticised the document for not providing enough information about how this will be achieved."
	The same report expressed concern about the Chancellor's growth projections, which are fundamental.
	Why is that so fundamentally important? Owing to the huge amount of money that we have to borrow and raise each year and roll over, even relatively small changes in the interest rate offered on Government bonds could punch huge holes through our finances in future. That is the key point. That is what will make investors-at best-more cautious.
	Investor confidence in our yawning fiscal chasm remains crucial. If that fails, two things may well happen: we would have to fund the deficit through further cuts in spending or increases in taxes elsewhere, or we would regrettably find ourselves heading towards the situation that Ireland and Greece face. There is a vicious cycle of deteriorating confidence: worsening confidence leads to a further deterioration in fiscal problems, which leads in turn to a further deterioration in confidence, and so on, until we are forced to take actions that would be wholly unattractive and unacceptable to all hon. Members.
	How large are the holes that could be punched through the national finances? The Debt Management Office said that it needs to sell £225 billion of gilts this year to cover the Budget deficit, and that debts need to be rolled over. A rise in the borrowing rate, for example from 3 per cent. to 4.5 per cent., would certainly cause difficulties. As it is, the Treasury is forecasting paying more than £60 billion a year to meet interest charges on the national debt. How would the Chancellor do that? If his plans for taxation and national insurance contributions are anything to go by, he would raise taxes on jobs and undermine that very employment so as to protect unsustainable levels of spending. I hope my hon. Friends agree that it would be good if he did not get the chance to do that for electoral reasons, but there is always that risk that he will.
	That may well be the consequence of a steadfast refusal to plan for the future reduction of the deficit for the short term. In essence, that is what makes the PBR so unacceptable. The Government are refusing to publish their predictions of future interest rates costs on Government debt or say what they are likely to be. When challenged by the Treasury Committee on why that information was not provided, the Chancellor said that
	"at the best times there is a degree of uncertainty, now there is a great deal of uncertainty."
	The Government make other projections on many other key variables in the economy, but not on that most crucial one, though it is at the heart of our ability to borrow. The Chancellor confirmed that
	"within the Treasury we have estimates".
	Frankly, he should let us hear what they are.
	Many will be asking themselves what is going to happen when the Bank of England asset purchase facility stops buying gilts. The supply and demand relationships in the gilts market will alter markedly. If next year the Debt Management Office tries to sell a similar amount to the £225 billion of gilts it sold this year, what will be the price with a £200 billion buyer effectively missing from the market? David Scammell, the fund manager at Schroders, said:
	"With the Bank of England seemingly set to phase out its quantitative easing buying programme-which has seen it effectively fund the Treasury to the tune of £200 billion over the last nine months-the supply/demand imbalance will clearly tilt towards higher yields...A 'buyers-strike' would accentuate the move. This would be bad news not just for gilt investors, but also for the economy, the banks and the government".
	That is at the heart of the dilemma.
	Since the publication of the PBR, it is becoming progressively more expensive for the country to finance its deficit. The PBR failed to achieve the credibility that the markets were expecting, which is what led to the view that the Government are currently able to hold down the cost of servicing the nation's debt only because those who are buying our gilts expect a change of Government in the very near future, and a Government who inspire confidence in their competence. Frankly, after the shambles of their management of the economy in the last few years, it is hardly surprising.
	We have heard a lot about PIMCO, the important American investment group. It has said that there is an 80 per cent. chance of Britain losing its triple A rating if the Government do not move swiftly. Scott Mather, head of global portfolio management, told Dow Jones Newswires that the current debt reduction plan
	"is lacking in conviction and lacking in details".
	When asked about a downgrade, he said:
	"I think so...it's just a question of when...not if. Based on what we know today about the debt trajectory and about the inability to adjust that, I think it's greater than a 50% likelihood. Call it more like 80%."
	This comes a day after PIMCO, which is the world's largest bond fund manager, decided to cut back on UK gilts-yet another buyer missing from a market where the Debt Management Office is desperately trying to sell our national debts.
	A clear measure that can be used to underline this erosion of confidence is how much someone would have to pay to insure themselves against losses suffered by holding our nation's debt. The figures are as revealing as they are shocking. As of last month, the annual cost of insuring $10 million of British debt for five years is $72,000. This is in the same league as Malaysia and Chile and $2,000 more than it costs to insure Slovakia's debt. How do we compare to countries such as France and Germany? One would hope that Britain would be in a similar fiscal position to such countries, but we compare extremely badly. It costs just $22,000 per year to insure $10 million of Germany's debt, and $24,000 to insure France's-a third of what it costs to insure ours. That is a clear judgment by outside markets on the risks caused by the fiscal situation in this country.

Richard Spring: My hon. Friend is right. We have had a dramatic devaluation of our currency, although I suppose it will ultimately be helpful to the recovery. The markets have made a judgment on our currency based on their view of our economy, and it is not exactly an A-plus judgment.
	Other statistics are also revealing. Not only are we a considerably less acceptable risk than other countries, but we are less creditworthy in fact than many firms and private companies. On the same basis as I mentioned a moment ago, it would cost $11,000 per year more to insure our debt than Vodafone's, $15,000 more than McDonalds', $32,000 more than BP's and an astonishing $35,000 more than Gap's. The sad fact of the matter is that the finances of large numbers of companies, in the midst of the biggest recession in living memory, are considered more creditworthy than those of the United Kingdom. That is an incredible judgment.
	The Chancellor has kept quiet on the specifics of the pain to come. That is of course simply naked politics. He steadfastly refused to go into the detail of how and where he would cut spending, or how and where he would raise more money, and therefore how, in reality, he would go about dealing with the crisis that the country faces. The IMF says that $36 billion needs to be cut from Department budgets by 2013-14 to meet the borrowing requirement.
	The few measures that the Chancellor did announce included an increase in national insurance contributions. That is a tax on jobs and affects everyone who earns as little as £20,000 a year-hardly progressive politics. That is why Richard Lambert, director general of the CBI, wrote in his editorial page in the CBI's magazine:
	"The Chancellor managed to annoy almost everybody with his Pre Budget Report. Yet despite imposing higher taxes on business, he failed to show how he would restore the public finances to health."
	He continued:
	"Put simply, the extra taxes he announced are being used mainly to support current spending for the next couple of years, rather than to reduce borrowing."
	That view can only be reinforced, because the Prime Minister has claimed that, if there is better than expected economic news in the next few years, some of the extra money could be used to sustain public spending rather than to reduce the deficit. And of course the Chancellor has disagreed with him. That is part of the problem of a disunited and dysfunctional Government.
	As the right hon. Member for Oldham, West and Royton effectively said, the key issue is what effect these policies have had on consumer confidence in the UK. According to the most recent survey by the Nationwide Building Society, in December consumer confidence suffered its biggest fall in more than a year. The proportion of consumers who thought that the economic situation would be better in six months fell to 34 per cent.-down from 41 per cent. the month before. The proportion of consumers who felt that now was a bad time to make a major purchase rose by 4 per cent. to 38 per cent. last month.
	Expectations for employment also worsened in December, with the proportion of people who thought that there would be many or some jobs available in six months falling to 25 per cent. from 27 per cent. Nationwide's chief economist said that although it is still early days, those lower expectations might foreshadow a more sluggish consumer outlook in 2010 as stimulus measures are withdrawn-we certainly hope that is not the case, but it does not look good. Consumer confidence, which is at the heart of our system, is one of the fundamental elements that the Government should be working to improve. It is what keeps money flowing around an economy and people in work. In that, I am afraid, they are clearly failing.
	When we look at these statistics, we have to ask ourselves whether any of this is in the least surprising given that since last year the Government have been borrowing at the fastest rate ever and the Bank of England has printed enough money to purchase the economic output of Denmark. People are crying out for somebody to show the way out of this mess. Regaining the confidence of the British people should be the job of the Government now. That is what will decisively break the country out of this vicious cycle of debt and decline. That is what will keep interest rates in this country as low as possible for as long as possible. In turn, that will help to lead to a sustainable economic recovery. We are now borrowing net nearly £500,000 per minute. It is simply not sustainable.
	I accept some of the points made by Labour Members-of course this debate might be arid, and I accept that we have to relate what we say to the reality of people's lives. Of course it is a matter of some satisfaction that, for a variety of reasons-not least the growth of the public sector, but also flexibility in the labour markets-unemployment has not reached the sort of levels that some had forecast. Ultimately, however, we simply cannot deal with problems of employment, confidence or interests rates if we do not grasp that particular nettle-borrowing. However, that simply is not being dealt with.
	The whole picture of chaos and contradiction in this Government was truly exemplified by the Prime Minister on Sunday talking about his pursuit of aspiration-one could not make it up-while attacking the Conservatives for wanting to make cuts. Absurdly, the next day, the Chancellor, and indeed the Chief Secretary, launched a document attacking the Conservatives for excessive spending promises. One need not have graduated from a kindergarten class to know that that is completely contradictory and shows that the Government have no clue how to respond.
	When the Government leave office this year, we will have seen a decline in our international competitiveness and relative educational achievement, the longest ever recession and our international reputation in tatters. How dismissive our European partners are of a country whose tripartite regulatory system so failed us that we now have so little credibility in influencing the key area of European financial services regulation! We have been led not by Presbyterian frugality, but by the most profligate Chancellor in history. When this tired, broken down, dysfunctional and disunited Government leave office, this PBR will simply be a milestone on the path to the electoral oblivion that they deserve.

Austin Mitchell: This opportunity to debate the pre-Budget report is an excellent innovation. It should have produced an interesting debate-indeed, a compelling one-on the state of the economy, but all that it has produced is a lot of sterile platitudes about the interests of finance, which caused the recession in the first place, through risk-taking and excessive lending, as against the concerns that we on the Labour Benches have been trying to express about jobs, employment, production and the real economy of this country.
	Nowhere was that contrast more typified than in the speech by the hon. Member for West Suffolk (Mr. Spring), who has just sat down. What he was saying, essentially, is that the problem is confidence. How do we get confidence? Only by returning a Conservative Government. How do we return a Conservative Government? By creating such a state of fear, alarm, panic, depression, horror and misery about this country's economic prospects that we just have to have one. That is a political strategy of knocking Britain and knocking our financial future. Frankly, it is damaging to the economy and to the jobs and the real people out there, and it is unworthy of the Opposition. What we should be debating is how to keep the economy going at a high level in the face of a recession that has been produced by the irresponsibility of the financial sector.
	This pre-Budget report is a difficult one, because it is difficult to predict the future, as the right hon. Member for Hitchin and Harpenden (Mr. Lilley) said. Indeed, we cannot predict the future-he went on to predict it in the gloomiest possible terms, but his essential point was that we cannot predict it. We are probably out of the recession now, in the technical sense of several quarters of negative growth, but its effects will linger on, in more closures, more unemployment and more economic difficulties. That is what we must combat. We cannot know now how long we will have to do that; therefore, it is difficult to make firm assumptions about the economic future in the pre-Budget report.
	The other problem with the pre-Budget report is that, because the Government feel obliged to look at the prospects for debt repayment and cutting the deficit, it predicts action in those areas. That has the result of moving the debate on to Conservative ground and the ground of a financial sector concerned with deficits and borrowing. However, in a recession, deficits and borrowing are not the problem; they are the solution. They are the only way of keeping the economy going at an effective level. In opposing deficits and borrowing, as they have done consistently for the past year, the Tories are preaching a system of economics that is not pre-Keynesian, but pre-Cro-Magnon.
	In my view-it is a personal view, but it is echoed by several Members who have spoken, or are yet to speak, on the Government Benches-the big problem in the economy is this. Although we have provided it with a stimulus, which has undoubtedly saved about 500,000 jobs-if we had not given the economy that stimulus, unemployment would now be at Tory levels, which they achieved twice in their period of government-that is not enough. The stimulus has to continue-indeed, we need a bigger stimulus-because that is the only way that we will get back to growth. The only way to deal with deficits and borrowing is through economic growth. With economic growth, those problems fade away.
	Let us look at the amount of debt that the incoming Labour Government paid off in the first three years of their existence, in a very powerful performance. That happened because of growth. With growth now, we can achieve the same results. That is why we must stimulate the economy, to get back to the level of growth that will pay off those debts as quickly as possible. That is the crucial issue: not moaning about debt and creating imaginary threats to our credit rating to frighten the City into supporting the Conservative party financially, which is essentially what the Opposition have done, but getting back to growth as soon as possible.
	In the light of that, it is disappointing that the pre-Budget report does not envisage a stronger building performance, or a bigger spend on housing. The big expansion in housing was the main means of recovering the economy in the 1930s, before we moved on to the stimulus from rearmament. The housing drive in this country built many houses. I am sorry to say that this Government's performance on housing has been pathetic. The house-building rate is lower than it was in the 1950s; it is back at the 1920s level.

Austin Mitchell: Absolutely. That is why I am arguing for a big housing programme. Housing means jobs; it stimulates demand. People need to buy carpets and furniture to put in their houses, although, in the main, the stimulus benefits employment in the construction industry. The kind of housing that we need to build is public housing for rent, because that is where the demand is now. That is what the 1.8 million people on council waiting lists around the country need. They cannot afford to buy, even after the fall in prices during the past year or so. We need a big housing drive, particularly for council housing, which has been the main area of inadequacy in our performance.
	One fifth of the population have a standard of living that is not adequate. They are, in a sense, deprived, and they need public housing. We have not built enough of it, but that is the only way of providing for the future. It is also a guarantee that, when the economy begins to recover, all the money does not go into escalating house prices as it did before. If we build a strong public housing sector, people will not be forced to buy when they cannot afford to maintain a mortgage. They will not be pushed into sub-prime ownership. What they really want and need is public housing for rent, and we provided that in the past through a housing drive. We now need a bigger housing and construction drive than the pre-Budget report proposes.
	In America, a useful measure has been introduced whereby construction projects that are shovel-ready can be financed to go ahead. That is eminently sensible in a recession. In this country, 140 college building programmes were cancelled as a result of the debacle at the Learning and Skills Council. Most of those programmes were shovel-ready, including the £150 million project for the rebuilding of the Grimsby institute. That project should have been started. It would provide jobs and an economic stimulus. Why are we not doing it? The allowance for housing and construction in the pre-Budget report is inadequate. We need both in order to boost the economy, particularly in the construction industry, which is stalled everywhere.
	There is also a need in this debate on the pre-Budget report to grapple with another issue that is more basic than the deficit and borrowing-namely, the need to rebalance the economy, which has been lop-sidedly developing a huge financial sector on a shrinking manufacturing and production base. No economy can function efficiently or generate growth and jobs when it is unbalanced in that way. The process of rebalancing it will be painful, but it must be started. I hoped that the pre-Budget report would place a greater emphasis on this matter.
	We cannot pay our way in the world now, because manufacturing has shrunk so much. It has been decimated in this country over the past few decades. It has been weakened partly by the rise to dominance-even to hegemony-of the financial sector and the City of London, under whose spell I am afraid the Government fell for far too long. The rise of the City has been damaging to the real economy of manufacturing for three reasons. The first is that the City and the financial sector would rather invest in Dubai than in Doncaster. They were never concerned with the industrial needs of this country. Secondly, the City does not exercise enough long-term thinking to support the manufacturing sector, while thirdly, of course, it always wants a high and stable exchange rate. Why? So it can manipulate money around the world to acquire assets overseas. The interests of manufacturing, however, lie in a low and competitive exchange rate, which allows more exports and the selling of products on the world markets.

Austin Mitchell: Over the last decade or so, it has provided an average of about 60 per cent. of our overseas earnings, but it cannot now support the economy or jobs in the way it did in the past-unless it is expanded, unless it is rebuilt and unless we shift the balance in the economy back to production and away from financial manipulation. That is our future, which will be bleak unless we do that; it will be a future of increasing debt in order to pay for imports that we are not currently paying for.
	For a couple of years our trade deficit has been higher than that of the Americans-a deficit that caused such a panic and alarm in the US. We should be alarmed and concerned about ours. All the experience of developing countries is that it is possible rapidly to develop a strong manufacturing sector if policy is focused on that by having a low and competitive exchange rate. That is what all the developing countries-starting with Germany, now finishing with China-have done. They started from a low exchange rate, which makes exporting profitable, building up a powerful internationally traded sector, which then achieves economies of scale and follows a process of continuous causation and improvement.

Austin Mitchell: That is absolutely true. We have networks of skills and surviving skills, which have been thrown on the scrapheap, but they could and should be mobilised for any expansion. It is true that we need a big training programme, as this is one of the bottlenecks in the expansion of manufacturing that needs to be cleared. That can be done through an industrial policy, which we have fought shy of for far too long, but which is necessary.
	As I was saying, the big expansion overseas, based on a competitive exchange rate in overseas countries, shows that manufacturing can expand and rebuild. It can do so by having a lower competitive exchange rate. We now have the opportunity for a 25 per cent. devaluation, which would make industry and investment in this country profitable again, which it has not been for the last few years. It was certainly not profitable under Thatcherism, which was based on the policy of destroying manufacturing to weaken the trade unions and the power of the country's workers. It was based on the assumption that as a phoenix rises from ashes, the more ashes created in manufacturing areas, the better would be the future of this country.
	I am afraid, I have to say, that that destructive process was continued under Labour because our concern was to fight inflation, which was done by keeping the pound high at an uncompetitive level, which subsidises imports. That also forces industry to cut its costs and shed labour in a pathetic and almost doomed attempt to stay competitive. This destruction continued and manufacturing shrank-to our shame, while we were in power-from 20 per cent. of GDP to perhaps 12 or probably 11 per cent. now in this recession. We must revive manufacturing and get it back to what it was.
	But as I look at the policies we have adopted up to now, I see that we are not effectively achieving that. We have "saved the banks", but our treatment of the banks defies belief. Whatever happened to moral hazard? The Governor of the Bank of England goes on about it, but as soon as moral hazard is affected by the banks, brought by their own follies and excesses into a disastrous situation, we rush in with money to pour into them. Manufacturing does not get that money. We poured money into the banks-that is a large part of the borrowing that we are arguing about-and we probably had to do so in order to save the banks, but nothing is going to, for instance, the steel industry in Teesside. What has gone to Vestas on the Isle of Wight, which is the country's only remaining wind turbine producer? What has gone to the manufacturing firms that are closing down and shedding labour, making people redundant? What is happening to them? We shall need their production, skills and output if there is to be any recovery of manufacturing and the economy, but we are allowing them to close down without Government support.
	The Government have poured money into the banks, and all that the banks have done with it is build up their reserves. They have not passed it on or relaxed their credit arrangements. Manufacturing is experiencing a double whammy. Money is being poured into the organisations that caused the crisis in the first place rather than into manufacturing, which has suffered the consequences, and the organisations that caused the crisis in the first place-the banks-are starving manufacturing of credit, refusing to tide it over until it can inherit the better times.
	This is a pathetic economic policy. Even the Government's policy of printing money-which is effectively what we are doing-does not really help manufacturing. What printing money does is, by buying back Government debt, buoy up the stock market and asset prices. It helps the financial sector, which holds the debt-primarily the hedge funds that have been selling that debt back to the Government at an inordinate profit to themselves-but it does nothing for manufacturing, the sector that we need to help and support.
	All the devaluations of the past-the devaluations of 1949 and 1967, the Tory devaluation of 1972-73 and the classic devaluation of 1992, when we were forced out of the exchange rate mechanism-have boosted manufacturing. Productivity and growth have increased, and the whole economy has been stimulated. We cannot let the boost that we have provided now, with a 25 per cent. devaluation, slip away as the last few prizes of devaluation slipped away. We must maintain a competitive exchange rate.
	More important, we must have an appropriate industrial policy. Exchange rate competitiveness, which means a low exchange rate, is a necessary but not sufficient condition for manufacturing revival. There has to be an industrial policy that will channel investment into manufacturing, help to see it through its difficulties, and break the bottlenecks. Whether we support planning, training, investment, research, design, development or marketing, we must help industry to move forward. We cannot wash our hands of manufacturing if we are to have a viable economy.

Austin Mitchell: My hon. Friend has made a valid point. I was delighted to hear the news that people who had been outsourcing-which produced a series of holes in the fabric of Britain's industrial society-are now bringing the work back to this country, partly because of the devaluation. I want that process to continue, but the Government, and my hon. Friends in general, must bear in mind that this manufacturing recovery is starting from a low and damaged base. It must go a great deal further, and must be encouraged and supported by Government, before it can produce the effects that I have described.
	We have a mountain to climb before we can again provide jobs for the people, pay our way in the world, and rebuild the manufacturing base from which innovation, productivity and national survival spring. That should have been the main message of the pre-Budget report, and because it is not, I am a little disappointed in it.

Peter Luff: I will do my best, Mr. Deputy Speaker.
	On Tuesday, the Government's flagship Bill, the Fiscal Responsibility Bill, attracted the active interest of just two Government Back Benchers-and they both opposed the Bill. I am not entirely sure that the support that the Government have received from the Back Benches today will be much more welcome. That is not to say that I disagree with everything that all those Members have said. My good friend the hon. Member for Great Grimsby (Mr. Mitchell) spoke about the importance of manufacturing. I entirely agree. Nevertheless there are ways of getting there.
	I hope that I will be present for the winding-up speeches. There are some issues about travel this evening and I apologise to Front Benchers if I am not here for their speeches. I will check my trains once I sit down.
	"There were two tests for this Pre-Budget report. First, would it increase the credibility of government plans to restore the public finances? Second, would it be a platform for job creation and economic growth? The government has failed on both counts."
	Those are not my words but those of the CBI director general speaking on the day of the pre-Budget report. It is not just big business that has spoken in that way. The Federation of Small Businesses reported that 44 per cent. of small businesses were less confident as a result of the PBR. I do not think that it has been said so far in the debate that we need to remember that the PBR bombed comprehensively on the day and calm and more careful consideration has not made it look much better.
	It is important to remember that this is a tragedy not just for the corporate sector, small, large or medium, but for thousands of individuals. The number of 16 to 24-year-olds out of work was 952,000 in the three months to October, a quarterly rise of 6,000 and the highest figure since records began in 1992. The OECD said in September that Britain now has the highest level of youth unemployment in Europe. That for me, of all the shameful failures of this Government, is perhaps the most shameful. I think that that statistic is not properly understood outside this place. I can imagine what would happen if a Conservative Government presided over youth unemployment on that scale. There would be shrieks of horror and outrage from Labour Members, who are very muted today, and tragically so.
	I am grateful to the Chairman of the Treasury Committee for his thoughtful contribution to the debate. It was measured, as was the Treasury Committee report that came out yesterday. It is important to remember that it, too, called for much greater clarity over spending reduction plans. It expressed concern about future gilt sales and highlighted fears about Britain's future credit rating. The PBR is being debated in an extremely worrying situation.
	I am fond of metaphors. I hope that this is an appropriate one. I see the Prime Minister a little like an arsonist who helped to start a blaze and then wants credit for stopping it from destroying the whole town. Stopping the blaze before it destroyed everything should not be a cause for congratulation if one is the author of the blaze itself.
	Three specific and serious mistakes by the Prime Minister when he was Chancellor, which are the background to the PBR, led directly to the recession, or at least its severity. The first was excessive spending in the good times-not mending the roof while the sun was shining. In fact, I would add that his plans added holes to the roof, funded by taxes on the bubble of finance and housing-a bubble that could never endure.
	The second problem is excessive debt, built up not just in the public sector, but in the private and corporate sectors, encouraged by the Prime Minister's false promise when he was Chancellor of an end to boom and bust. Thirdly, there was poor regulation of financial services. At least two of those factors were present in the United States of America too, but it will not do for the Prime Minister to claim that the problems that underlie the PBR have their origins in the States or the international economy. They have their origins here, too. The Prime Minister is to blame for the crisis that this country now faces. He has earned no right to be praised, as this country has been mired in the deepest recession since the 1930s and he is part of the reason for that.
	It cannot be said too often that Britain is currently the only G20 country officially still in recession. We might come out of recession in the current quarter, but the fact remains that this has been a huge and severe recession. It has been a personal tragedy for many thousands of our fellow citizens, and the UK has suffered a 6 per cent. cut in the size of its economy, beaten in that regard only by Japan, Italy and, I think, Germany. We have lost that for ever; as growth returns, we will still have lost that part of our economy.
	According to a construction survey, the British building industry suffered its 22nd successive monthly fall in activity in December, and employment in the contracting sector fell again last month. Many businesses still fear a double-dip recession, and consumer and business confidence is still fragile, to put it mildly. The PBR succeeded in denting consumer confidence further. Yet, for all this, the Prime Minister wants credit.
	The tragedy for our nation is that this is a pre-election PBR. At this time of great economic crisis for the nation, it would be better if we were not on the verge of an election. The PBR has become a product of electoral expediency, not economic necessity. Tragically, it has also exposed the deep divisions at the heart of Government, as well as a very unwelcome desire to create divisions and add dividing lines in politics in general at a time when we should be doing precisely the opposite.
	Yesterday, Lord Mandelson made a very thoughtful speech, which was occasionally devalued by political point scoring. In it, he said:
	"We need a politics of long-termism over short-termism; of a smarter, more effective and affordable state; of a return to the values of hard work, enterprise, corporate stewardship and mutual commitment over those of dodging responsibility, making a fast buck, and putting self before others; of working together as a nation to address the shared challenges of the future."
	I agree with that, but all we got on 9 December was short-termism by the bucket load. We got a larger, less effective, less affordable state. We got taxes on hard work and enterprise, and deliberate dividing lines designed to split us apart, not bring us together.
	Lord Mandelson was right, and the PBR was wrong. As was said in  The Guardian recently:
	"The Government remains at war with itself, with Brown, Balls and Cooper pursuing the line of 'Labour spending versus Tory cuts' and Mandelson and Darling favouring a pragmatic, deficit-slashing PBR. We can see who won. Lord Mandelson is apparently still seething with anger-'incandescent' at the outcome of the PBR."
	As my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) said in his thoughtful remarks, this Government's reaction of retreating entirely into increasing taxes rather than attacking public expenditure is the problem. The large increases in national insurance on all of us in society-including those on below-average earnings-and the 50 per cent. income tax rate are taxes on aspiration, enterprise and hard work.
	Lord Mandelson tried to justify that in his speech yesterday. He said that
	"there is never a case for punitive taxation",
	but he also said:
	"As for the new top income tax rate, I believe that is justified in the quite exceptional circumstances we face."
	What are those exceptional circumstances? As was said in the Financial Times on 11 December, the national insurance increase
	"will raise £3 billion a year from 2011, but that money is not being used to pay down the £178 billion deficit; the tax rise is needed to offset Mr. Darling's surprise decision to increase public spending by almost £15 billion in 2011 and 2012 compared with previous plans."
	As the Centre for Economics and Business Research put it:
	"If public sector wage inflation had risen at the same time as that in the private sector over the past two years, £21 billion of the national insurance and income tax rises to be introduced in April would have been unnecessary."
	These are Government decisions that are making our problems worse, not better. They are taxes on jobs, aspiration and enterprise. They may win some short-term cheers in the run-up to an election, but in the long run they will cause more pain, suffering and economic problems.
	The same is true of the bankers' bonuses tax. I loathe the scale of the bonuses, and I agree with the Chairman of the Treasury Committee, the right hon. Member for West Dunbartonshire (John McFall) on that, but not only have the measures to address that been brought forward in a technically incompetent way which caused massive confusion in the City, but they will have a negative impact on our competitiveness. We cannot duck that. We do not live in an isolated country any longer, and I do not see our chief economic competitors-the United States and Germany, for instance-following our lead on that matter.
	The scale of our debt mountain is great, and I find it incredible that Government members are advocating still higher debt. In this week's edition of  The Economist, estimates of various countries' budget balances as a percentage of GDP for 2009 are listed. By a long chalk, Britain's is the highest, followed by the United States. Only Spain joins us in having double-digit figures. All the rest of the major industrial nations of the world, and some very minor ones as well, are running smaller budget deficits than us.
	In September-before the PBR- The Times illustrated that dramatically in a leader entitled, "Fainting by numbers". I had hoped to have the time to recite quite a few of those numbers, but bearing in mind your strictures, Mr. Deputy Speaker, I will not do so. I shall just use one. The article stated:
	"The most succinct statistic is also the scariest: by the 2013-14 financial year, government spending on welfare and on servicing the national debt will total £257.1 billion. How much does that amount to exactly? Just over £1 in every £3 that will be spent by the Government."
	In other words, these are the bills of failure. I remember what Tony Blair said when he was in opposition about what he described then as the "bills of failure". Those bills pale into insignificance by this scale; we are talking about massive borrowing and massive social security expenditure. Those are the bills of failure that have been brought about by this Government. Richard Lambert's new year message from the CBI stated:
	"The Government has not yet established a credible path back to fiscal stability for the UK. The longer this is delayed, the greater the threat to long-term interest rates and sterling. Everyone knows that painful decisions are going to have to be made sooner or later about public spending and tax. But the timing and shape of these moves remain unclear-and that is another significant concern for business."
	I have already said that the problem is that the Government did not fix the roof when the sun was shining, and that is true-the structural deficit is alarmingly high. It is a structural deficit; it is not the product of bank bail-outs and so on. It is the problem of systemic Government failure to manage the public finances appropriately. The Institute for Fiscal Studies wrote the following on the day of the pre-Budget report:
	"The Treasury now believes that the structural budget deficit-the portion of government borrowing that cannot be explained by the temporary weakness of the economy-is 'only' 9 per cent. of national income this year, rather than the 9.8 per cent. it estimated at Budget time. This means that the underlying fiscal problem looks somewhat smaller than it did in March, although still huge by any standard."
	It is indeed huge by any standard, but I must add that that is predicated on the very optimistic forecast of a return to above-trend growth rates in two or three years' time. I do not believe that forecast; I do not think we will do that well. Thus, the problem of dealing with this situation is still worse.
	I had wanted to talk in detail about one or two specific issues, but I shall just run through them very briefly. I wished to discuss the lack of finance for manufacturing and businesses in general, but that has been done and so I shall not reiterate the point-I should just say that the situation is extremely worrying. I would have liked to talk about the comments made by those on the Liberal Front Bench about across-the-board cuts in science, but I shall not do that either.
	However, I wish briefly to mention manufacturing. I do not want to talk it down-not for a second. It is right to say that, notwithstanding the current recession, manufacturing has grown over the past 13 years under this Government, but it has shrunk massively as a proportion of gross domestic product; it has done that so much more over this period than it did under the so-called Thatcher years. The Government need to think carefully about their policies to deal with that problem and this pre-Budget report does not do that. It talks a lot about future growth, high-technology industries and low-carbon industries, but many traditional industries, for example brick making in my constituency and glass making, have been hit very hard by decisions in this PBR about alterations to the climate change agreements. We are talking about very sharp stealth taxes on traditional manufacturing industries that will lead to further manufacturing job losses in this country, the import from abroad of the products that would have been made here and carbon leakage-no gain, just loss. I urge the Government to think a bit more about traditional industries, as well as about future industries.
	I also urge the Government to examine the reasons for the failure of the automotive assistance programme, which has still not delivered a single penny to any automotive business in the United Kingdom a year after it was launched. I welcome the extension of the enterprise finance guarantee scheme, despite the cynic in me thinking that it may have something to do with the fact that the scheme has not got money out of the door quickly enough and the money is still left in the bank, so the Government are extending the period in order to use the same amount of money over a longer time.
	The one other issue that I wish to raise is that of a windfall-there is some good news-about which I know the Financial Secretary to the Treasury is aware. It comes from the digital dividend review. I am talking about the sale of the spectrum, which will result in the digital dividend. That spectrum is used largely by television, but it is also used by radio microphones, which are crucial to community halls, outside broadcasting, music, theatre and a range of interests. The Government originally promised to compensate such interests in full for evicting them from the spectrum. The cost of that eviction is about £70 million to £75 million, but it should unlock a windfall of £2 billion for the Treasury. I hope that the Government will stick to their promises, and I have received some encouraging answers from the Minister, who was wearing both of his hats this morning-operating as a Department for Business, Innovation and Skills Minister and as a Treasury Minister-to suggest that they might just do that. I hope that he will stick to that, because that £75 million is the permission to unlock a £2 billion windfall for the Government.
	We are not out of the woods yet. The international banking crisis could still get worse. Net lending to companies is still shrinking and we face huge structural problems, but I believe that they can be faced in the lifetime of the next Parliament. As Richard Lambert put it
	"the job of political and business leaders is to focus relentlessly on those policies that will enable a different and more sustainable pattern of economic growth for the future-education and skills, enterprise and innovation, competitive taxes and flexible labour markets, private sector investment, trade growth and open markets."
	Sadly, there is little sign of that in this PBR.

Derek Twigg: First, Mr. Deputy Speaker, may I apologise for the fact that I will be unable to stay for the closing speeches? It has been a pleasure to listen to the debate and some excellent speeches have been made.
	The PBR represents firm action to help secure recovery, to go for growth and to halve the deficit in four years while protecting key services, and the subject of key services and public services in general will form a major part of my speech. I believe that the PBR offers a balanced package, and the best economic approach for long-term stability. The Government are taking tough decisions to halve the deficit and to make a range of savings and efficiencies that we know, in some cases, will be very difficult indeed.
	I particularly welcome the commitment in the PBR to spending on schools and to NHS expenditure, the increase in the basic state pension and the child element of the child tax credit.
	I also want to highlight the issues to do with the tax on bank bonuses, which is very important. We should not be put off by scaremongering. Many of my constituents welcome that tax, as do most people in the country. Some people in the banks got off very lightly indeed. I also welcome the measures to do with tax evasion and tax avoidance, which are very important for fairness and will raise a significant amount of money. They will play an important role in ensuring that we get that money in and that we stop people avoiding and evading tax.
	I want to spend some time discussing the issue of employment. I was pleased to see in the PBR that £300 million will be brought forward to offer a job, training or a work placement to every 18 to 24-year-old who has been claiming jobseeker's allowance for six months. Unemployment is a great concern and many people in my constituency have suffered from the economic downturn. However, unlike the Opposition, we have not walked away from that and we are doing all we can not just through the fiscal stimulus but through the other methods that I shall come to shortly. When the Opposition were last in government, they said that unemployment was a price worth paying. We should never forget that.
	In Halton in the 1980s, almost one person in five in my constituency was unemployed. Many were pushed on to incapacity benefit. Let me give some figures that I mentioned before. For instance, in August 1985 19.1 per cent. of the 16-to-19 age group were unemployed. In August 2009, 6.7 per cent. of that age group were unemployed. That is still obviously too many, and we have to do more, but the fact that one in five of my constituents were unemployed for many years shows the massive scale of the problems that we faced then.
	We should also not forget the record interest rate of more than 15 per cent. Rates were very high for a very long time, and many people lost their homes. We saw record levels of repossessions with no help from the Government of the time. I am pleased that we are doing more on that. We have helped people to stay in their homes and I hope that the Government will continue to do more. Of course, it is still a personal tragedy for those who lose their homes.
	I also want to welcome the improvement in support for debt counselling and advice services and access to them. The PBR provides extra money for citizens advice bureaux, which have helped many people to stay in their homes and to get their debts under some sort of control. Only this week I had a call from a constituent who thanked me for helping her by putting her in touch with the right people to get debt advice. She was then able to get an agreement with the mortgage provider and can now stay in her home. That is not untypical of what has been going on during this economic downturn.
	The stimulus has been very important in dealing with unemployment, but my right hon. Friend the Financial Secretary will not be surprised to hear that infrastructure projects are one of the big areas in providing employment and stimulus. May I remind him of the proposed new Mersey crossing? It is a £400 million project and the report of the inspector's recommendations and the inquiry that took place last year is due to land on the desk of the Secretary of State in the next few weeks. The crossing will provide hundreds of construction jobs over the next few years, if it is approved, and about 4,000 or 5,000 jobs thereafter through the economic benefits that it will bring. So, as well as improving the congestion problems in my constituency, and in Merseyside and Cheshire, it is very important for jobs. I hope that when the report lands on the Treasury's desk, the project will get the quickest approval possible.
	I want to spend a little of the short time available to me talking about public spending, which the Conservative party sees as a great evil. There have been massive improvements during Labour's time in government; Labour Government expenditure has brought great improvements throughout the country, not least in many public services in my constituency. Many people now take those services for granted, and it is worth reminding them what has happened. The greatest contrast is between hospital waiting lists now and previously, when it was common for people to wait two years or more for an operation. Those waiting times are now down to a few months or even weeks in some cases. That has been a massive turnaround. If anything shows the differences between now and previously, that change is it.
	Other benefits in my constituency are the modernisation of many schools with the provision of new buildings and sporting facilities. There have also been tremendous improvements educationally, with many great improvements in exam results. There have been improvements in transport and significant improvements in local health services and access to such services. Whiston hospital, for example, which serves many of my constituents, has received investments of £250 million. There are many private rooms in that hospital. We would like to know what the Tory promise is on private rooms, because they seem to be backtracking again. That brand-new, modern facility will serve my constituents and the wider area, replacing the Victorian buildings that the Tories always thought were okay for treating our people in. There are also improved cancer services, and more doctors and nurses.
	Let me make a point about the current weather situation and public expenditure. We should not forget the cold weather payments that are being made. The winter fuel allowance is particularly important to pensioners and the disabled. I want to make that point very clear. The free bus pass for pensioners and the disabled is another thing that is often taken for granted now, and is another example of good public expenditure.
	It is important to remind people what life was like under a Conservative Government. We have only to remember Black Wednesday and what happened to the pound then. There were record unemployment rates of more than 3 million, two recessions, long NHS waiting lists, as I have mentioned, and record numbers of repossessions. That is what life was like under a Conservative Government. Even on tax, the Conservatives' record was dodgy. It took them almost 18 years to reduce the tax burden-that was a long-held promise that they made early on in their years of power-so even they had trouble doing that. We should remind people about that.
	I believe that our approach to the economy is the right one, and that the Conservative approach lacks credibility-whatever that approach will finally be. The hon. Member for Runnymede and Weybridge (Mr. Hammond) refused to give a date for when he wanted the deficit to be halved when I asked him to do so. He was asked about that two or three times. It is clear that a Conservative Government would revert to type, would introduce massive cuts in public expenditure and would not support public services or maintain the improvements that the Labour Government have made.
	Any Government will have to make significant savings, but the speed and scale of the savings will be crucial. That is the difference between the Conservatives and us: we will continue to put whatever stimulus we can into the economy and will also improve public services. The scale of cuts could be horrendous under the Conservatives, but we do not know what the full scale would be because they are not being open and honest about what they intend to do. I believe that we have the right approach to deal with the situation.
	I also believe that the people of this country will not be fooled by what the Conservatives are saying. They know what the Conservatives are like and what will be reintroduced if they get back into power. I believe that they will stick with and trust the Labour Government, having seen Labour's good management of the economy. The economic downturn has been handled well, and we have been seen as a world leader in that regard. The downturn has been very difficult for millions of people in this country, but by having a stimulus, by improving public expenditure in certain areas and through good stewardship, we can continue to bring improvements for the future of this country, its public services and the economy.

Stewart Hosie: I shall return to the Dundee aspect.
	A great deal of public money is to be spent on that centre, but I wrote to the Minister or one of his colleagues to suggest that they needed not only to be very careful of unintended consequences, but to ensure that the vast amount of public money being invested in the new centre did not have a detrimental effect on the sector and on employment in the city. I am very well aware of the centre and the potential risks that follow it.
	The Chancellor spoke about the need to invest in the digital and other dynamic sectors of the economy, but for those at the coal face of the digital economy there was little but let-down in the PBR. The reason I cite the software and games sector is not just because it is important to Dundee, but because it is an export business; it generates revenue for the UK. In the PBR the Chancellor said that export trade had been hit hard, and boy was he right.
	We have a total trade deficit of £37 billion last year, and a colossal £93 billion deficit in the trade in goods-all that, as others have said, at a time when sterling was down massively against the dollar and the euro. As a result, GDP growth was suppressed by about 1.5 per cent., but there was nothing in the PBR specifically to stimulate export activity other than the statement's vain hope that demand from the US and the euro area might pick up.
	The Red Book suggested that GDP would be enhanced by about 0.5 per cent.-that there would be a 0.5 per cent. contribution to GDP growth from 2010 onwards. But, given that, on average, the balance of trade deficit suppressed such growth between 2000 and 2007, I hope that that is not Government wishful thinking.
	I am conscious that other people want to speak, so I shall make three final brief points. First, the Chancellor said:
	"We must continue to support the economy until recovery is established."-[ Official Report, 9 December 2009; Vol. 502, c. 359-60.]
	But on Tuesday he said that we are still in recession, yet the cuts have already been announced, so that makes no sense.
	Secondly, the Chancellor said:
	"To cut support now could wreck the recovery. That is a risk that I am not prepared to take."-[ Official Report, 9 December 2009; Vol. 502, c. 360.]
	However, the International Monetary Fund has confirmed that the UK will be the only G7 economy fully to withdraw its fiscal stimulus measures in 2010.
	Finally, on the low-carbon economy, the Chancellor said that he was determined to build on strengths today by maintaining what he called the UK's
	"leadership in the low-carbon sector".-[ Official Report, 9 December 2009; Vol. 502, c. 364.]
	However, we have heard it all before. The 2005 Budget stated:
	"The Government is...examining how it might support the development of CCS"-
	carbon capture and storage. The 2005 pre-Budget report stated:
	"Carbon capture and storage protects the environment from carbon emissions by containing them at source."
	In the 2006 Budget statement, the Chancellor said that following a joint study with the Norwegian Government, the Government were going to take measures on carbon capture and storage, and the same thing was repeated in the 2006 pre-Budget report and the 2007 Budget statement. We had one such statement after another up until early 2007, and by 23 May BP had pulled out its £500 million investment in Peterhead and taken it to Abu Dhabi because this Government could not make a decision. That shows the systemic problems that we have. There is talk about investing in digital, and then disappointment for those in the sector; talk about not withdrawing the stimulus before the recovery, and then doing precisely that; and talking a good game on the low-carbon economy, and then failing to deliver. That has been the hallmark of this Government over many years.
	At its heart-this is a tragedy, because there is a big job of work to be done to tackle the problems in the economy-the PBR was an invented political dividing line whereby the Government pretended that one party was not cutting and that another one or two parties might do so. The truth is that whether it is a Labour cut, a Liberal cut or a Tory cut, making it too early and too quickly will damage everybody's chances of recovery.

Phil Wilson: This is a general debate on the pre-Budget report, but it is a good opportunity for Members in all parts of the House to get various points across on a very important issue.
	For me, the PBR was about whose side the Government are on. I believe that the Chancellor proved in his statement that they are on the side of the people from hard-working families who were left behind in previous recessions because unemployment was seen as a price worth paying. This Government do not believe that it should be the function of financial markets to make money out of other people's misery. The PBR was about making choices and naming priorities. The Government's whole economic strategy, since the global economic crisis started in autumn 2008, has been to be on the side of the people.
	In my constituency, unemployment currently stands at 2,361. Yes, it has gone up during the recession, but it is still half what it was during the 1980s, when 5,500 people in my constituency were out of work-40 per cent. of them, or more than 2,000, for more than 12 months. Today, about 88,000 people in the north-east are out of work; in the 1990s, at the height of the recession, the figure was more than 100,000, and in the 1980s it was more than 200,000. Today, 1.5 million people are on jobseeker's allowance; in the 1980s, more than 3 million were claiming the equivalent benefit. Today, youth unemployment, if we strip out those young people who are in full-time studies, stands at 9 per cent.; in the 1990s, it was 12 per cent., and in the 1980s it was 13 per cent. Some people expected home repossessions to go through the roof; they have not, but they did in the 1990s. People thought that businesses would go to the wall more rapidly, but they have not, unlike in the 1990s. Today, 70 per cent. of people who are out of work find a job within six months, and the future jobs fund will guarantee that every 18 to 24-year-old receives training after six months. A package of £5 billion is being spent to ensure that our young people get through the downturn. Some people would not have spent that money because they believed the recession should have been allowed to take its course, but surely this initiative is underpinning the economy by helping consumption, which in itself helps to create growth.
	However, things are still tough. It was right that the Government intervened to introduce the fiscal stimulus, which has prevented the economy from entering a second great depression; the rest of the world is doing something similar. We are able to borrow money to aid the recovery because before the global economic crisis our debt levels were lower than those of a lot of our competitors. In the Fiscal Responsibility Bill, the Government have said that over four years they intend to cut the deficit by 50 per cent. from 12.6 to 5.5 per cent. They have identified billions of pounds of savings through "smarter Government" reforms. There is a new 50 per cent. tax band, an increase in national insurance, and a payroll tax on bank bonuses. Because of the fiscal stimulus measures taken by the Government, growth will also enter into the equation eventually.
	The Tories lack the political judgment that is needed in tough times. They were wrong on the recession and they are wrong on the recovery. To me, that is a fundamental dividing line between the Government and the Opposition. The Conservatives are the only main political party that aspires to government in any of the 186 states of the IMF that actually believes the fiscal stimulus was a mistake.
	The Opposition want to do away with dividing lines, and they have started to say that the Government are using class war. That is not the right attitude to take, and in a democracy it is the wrong way to approach politics. The success of this Government is based on a broad coalition of beliefs in the country and cuts across so-called class divides, which is why in a few months' time we will win the next election. The other reason is that my constituents are deeply concerned about what would be taken away from them if ever the Tories got into government.
	In all my years of political involvement, the only evidence of class war that I have ever experienced was the division created within, and the ultimate closure of, the communities that I grew up in by the Conservative Government during the 1980s. Communities were closed and left behind. To me, the backdrop of "Billy Elliot" is not just a west end show; it is something I lived through. I will never believe the Leader of the Opposition when he purports to be a progressive Conservative until he apologises for the callous behaviour of his predecessors. Class war should remain back in the 1980s-I actually agree with the right hon. Member for Hitchin and Harpenden (Mr. Lilley) about that.
	Since then we have had 13 years of a Labour Government, and now we have something called the "progressive Conservatives" because the Opposition know that to stand any chance of getting elected, they have to prove that they have moved on and been reincarnated into a more cuddly version of their former selves. But they have not changed. We now see dividing lines that they interpret as class war. I do not really care whether the Leader of the Opposition went to Eton; my predecessor went to Fettes college, which was seen as being the Eton of Scotland. However, I must say that as a parent I would be really disappointed if I spent all that money on my children's education and they still turned out to be Tory MPs. At least my predecessor obviously learned something.
	I understand that there are something like 15 Etonians on the Conservative Front Bench. What would they say if there were 15 Members on the Government Front Bench at any one time who had attended, let us say, Sedgefield comprehensive school or Wellfield community school in my constituency-two perfectly good schools with excellent teachers and pupils-or any other state school, for that matter? What would be the reaction of some? That it was a conspiracy and that the old school network had penetrated the highest echelons of the establishment. Surely that should not be allowed to happen.
	I want people from all backgrounds, including from all state schools, to be given the opportunity that has been the preserve of the few for so long. That is why this Government have invested so much in education and the Opposition have opposed it. Any pupil of any school should be allowed to aspire to serve in government, and the broader their experience the better. That is aspiration, and it is what the PBR is intended to underpin.
	For me, the PBR is symbolic of the Government's intent, and the Opposition's criticism of the report's fundamentals also speaks volumes. I am not surprised that they want to do away with any talk of dividing lines and are trying to say that it is about class war, because they are on the wrong side of the argument. For all their efforts, they have not changed. They are not progressive Conservatives at all-how can a person be? They can be either progressive or conservative. A progressive would have voted for the creation of the NHS, a conservative would have voted against it. A progressive would have voted in favour of the minimum wage, a conservative would have voted against it. A progressive would vote for investment in health and education, a conservative would vote against it. In this House, I am pleased to be on the side of the progressive. A progressive looks for consensus and acts accordingly. A conservative, in the country's hour of need, makes it his priority to cut tax for the 3,000 largest estates. In this recession, who is looking after the concerns of the many and who is looking after the vested interests of the few?
	I wish to say one thing about bankers and bonuses. I read a report in  The Times on 4 January stating that Deutsche Bank, which incidentally lost $10 billion during the credit crunch, wants to spread its UK tax across the pot that it holds globally because, as its chief executive officer said, it would be
	"unfair to treat the UK bankers differently".
	He wants all his bankers around the world who are due bonuses to do some of the heavy lifting. Basically, that gives us an opportunity. The Government should be acting internationally to ensure that bankers are treated the same all around the world. The problem we have is a global challenge. Economies acting in concert should consider a Tobin tax. Even if we do not have a Tobin tax, we need to create mechanisms that help to stabilise international transactions, so that financial planning is a long-term objective and transactions are not used as a means of short-term gain.
	While hundreds of thousands of our constituents pay the price for the bankers' failures, the Opposition do not think twice about filling their election coffers with millions of pounds from the City, including from Stanley Fink, the supposed godfather of hedge funds, who has given £1 million to the Tory party. In fact, on the way to half the cash raised by the Tories has come from the City. It is no wonder that one of their priorities is to cut tax for 3,000 large estates. So much for progressive conservatism.
	I want to say one last thing about how we get out of this recession and about the Tories' approach to the PBR. They basically want to create a quango rather than have Parliament oversee how we get ourselves through this time and pay down the debt in the next four years. Ultimately, that is about what kind of society we want. We want a good society, governed by smart government. The only way that we are ever going to achieve that is through this PBR and this Government acting with the people to ensure that we elect a Labour Government in a few weeks' time.

Paul Farrelly: I recognise the difficult balancing act the Chancellor faced in compiling the pre-Budget report in the most difficult economic and financial circumstances that we have faced in many years, as he will with the Budget proper. However, on fairness and taxation, I and many others believe that he has not quite got the balance right.
	Every economy will have its peaks and troughs. No Government are potent enough to abolish the economic cycle, and no Government in the free world can dictate human nature, with its swings of optimism and pessimism, and the credit cycle, which results from the expansion of banking and credit over the centuries. However, it is important that the Government recognise the dangers and weaknesses within the modern free market and act accordingly, through fiscal and monetary policy in wider economic management, and through a robust framework of regulation, and the willingness to act promptly when the public interest demands it, in the financial markets.
	Before becoming an MP, my career was in banking and then in financial journalism. Latterly, I was the City editor of a national newspaper. From the early 1980s, I either witnessed close-up or reported in detail on each major financial and economic crisis as it unfolded, including the 1987 stock market crash, the 1990s recession, sterling's ignominious exit from the European exchange rate mechanism, the problems that engulfed the Lloyd's insurance market-the so-called LMX spiral-when nobody knew where the risks really lay, and the bail-out in the late 1990s of the massive US hedge fund Long-Term Capital Management, which happened because the Clinton Administration and, importantly, Wall Street, did not know where the liability merry-go-round would stop and how much damage could be done to the global financial system. The unique problem in my working life-it forms the context of this PBR-is the current credit crunch and global recession. In this crisis, the aspects of those other crises, save for the problem of maintaining a fixed exchange rate, have descended us at the same time.
	History will tell, but arguably the key individual action that crystallised the credit crunch, ignoring previous lessons from the 1990s, was the Bush Administration's decision to let Lehman Brothers go to the wall. Equally arguably, the single most important policy action to contain the damage was taken first not in the United States but here in the UK-prompt and decisive action to rescue the banking system by the Chancellor and the Government. That happened not in the bankers' interests, but in the public interest. Also in the public interest, the Government responded to stimulate demand and to contain a more damaging downward economic spiral, as any intelligent reader of history would have done. That is the background against which the Chancellor delivered the PBR before Christmas.
	The key difference between this recession and the one in the 1990s is that in this one, the Government have taken positive action to ameliorate its effects-they have not simply let events take their toll on industry and ordinary families. The key difference with the 1980s is that this recession was precipitated by a massive shock to the financial system. True, it was not helped by over-lax financial regulation, with the Government, in good economic times, continuing the previous Conservative approach. But unlike the 1980s' recessions, it was not brought on by the Government themselves through ideological experiments in monetary policy as a dose of harsh medicine, a self-inflicted pain that harmed much of our manufacturing industry, especially in areas such as mine in north Staffordshire, and permanently blighted much of our economy and many of our local economies.
	Any reasonable person should welcome the individual measures in the PBR to help industry and businesses, as well as the determination not to jeopardise recovery by cutting Government spending too far or too fast. However, I would have liked the Government to go further on manufacturing. The financial crisis has delivered the sharpest lessons on the dangers of over-reliance on the financial sector and the City of London with all its short-termism. It is vital that we have a whole new emphasis on and encouragement for manufacturing. Our major competitors-Germany, France and Japan-do this. There, it would be inconceivable that only a fraction of the machinery for one of the UK's biggest renewable energy projects-the London array-would be supplied by domestic companies. We have simply not taken enough advantage of new or existing industries.
	Anyone who had cause to go to the old Department of Trade and Industry to seek help for industry would have been dismayed by the "hands off, can't do and won't help" mentality of officialdom. That was another painful hangover, like the so-called light-touch regulation of the City, from the Thatcherite days. A whole new attitude and approach is needed. I encourage the Chancellor to take up that theme strongly when he presents the Budget proper.
	The Chair of the Select Committee has already addressed at length the City and financial regulation, including in particular the importance of getting performance incentives right-

Paul Farrelly: I was involved in the City myself many years ago, and I had very good reasons for leaving it. My right hon. Friend may not be surprised to learn that the City will be well represented in the constituency of Newcastle-under-Lyme during the next election, as my Conservative opponent is 27 and a City lawyer with Sullivan & Cromwell, which advised Lehman Brothers just before it collapsed. He will be close at hand on Monday, when bankers and lawyers will be emptying their wallets at the Carlton club-president, one Margaret Thatcher-for a £65 a head fund-raising dinner. I have the invitation here if my right hon. Friend wishes to take it up.
	It is clear that the behaviour of City bankers has not changed, even in cases when the banks have benefited from the public purse, even given the reduced competition after the turmoil. The extra levy on banking bonuses is therefore welcome. It is only a short-term measure and it may be subject to fancy avoidance schemes, but it is important in encouraging a greater sense of responsibility in the City. I wish that the Government had done it and been tougher in action and rhetoric before. Shareholders-the major pension funds and insurance companies investing our money-should also have taken a more active stance in the past.
	In the PBR, the Chancellor also said it was important to take tough decisions on tax now. He said that he was determined that any tax increases would be guided by our values of fairness and responsibility. In a decent, civilised and progressive society, that overall philosophy is surely right. In the PBR, the Chancellor has finally recognised that a quarter of all the money spent on pension tax relief goes to the top 1.5 per cent. of earners. He will now reduce those benefits. I welcome that limited measure, but again wish that the Government had done it before.
	With respect to fairness in taxation, there is one glaring issue that this PBR, like its predecessors, does not address. That is the rate of capital gains tax which, at 18 per cent., remains lower than the basic rate of income tax and much lower than the higher rate of income tax. As such, it remains unfair: some of the lowest-paid workers will pay a higher rate on hard-earned income than many wealthy people will on unearned income. Also-this is very important-it constitutes a continuing huge incentive to tax avoidance. To eliminate that incentive, therefore, and to protect the tax base, capital gains tax should be aligned with the marginal rate of tax. I hope that the Chancellor will address that glaring anomaly in the Budget.
	We inherited that position from the Conservatives in 1997. Progressively, we reduced it under taper relief, which between 2001 and 2008 cost the Treasury an enormous amount of money-£28.1 billion. To put that into context, it is £6 billion more than the £22 billion proceeds from the 3G mobile phone licence auction, which itself reaped more for the Treasury than all previous privatisations put together. Far from taking the long view, the move has encouraged exactly the opposite: a constant churning of deals and investments. The British disease became ever more rampant, and frankly it was a huge tax break that in great part went to the City and private equity.
	I do not yet have figures for how much the change to 18 per cent. is estimated to have cost. In the future, it would be useful if the Treasury could provide them and explain why we have yet to address the glaring anomaly that I have highlighted? According to the Treasury's own figures, a rise in the marginal rate of tax would raise £2 billion for the public finances. The proposal to lift the rate of national insurance by 0.5 per cent. would raise £3 billion and mean that, however regrettably, ordinary families would share the burden. In the interests of fairness, however, it is important that the anomaly be addressed.
	In conclusion, I welcome much of what is in the PBR, but in many respects, particularly on encouragement for manufacturing and fairness in taxation, we could be much bolder. I hope that the Chancellor will address those issues in the Budget.

William Bain: The pre-Budget report safeguards vital investment in schools, hospitals and policing, and more importantly helps to create employment and training opportunities across the country as we prepare for the return of economic growth this year, after what was, in 2009, the most difficult year for the UK economy since 1922.
	No country has been insulated from the devastating effects of the collapse in the derivative markets, which has been the root cause of the recession. This has been the first global recession of a globalised financial system. However, the Government have taken strong action to recapitalise the banks and save the financial system through £850 billion in recapitalisations, loans and other guarantees. They have also shown strong leadership at a time of economic crisis.
	The Bank of England has also taken decisive action in monetary policy in maintaining interest rates at 0.5 per cent., and in my view the policy of quantitative easing has been broadly successful in injecting almost £200 billion into the economy through asset purchases. As the Japanese recession of 1990s and early 2000s has shown, interest rate reductions on their own cannot generate a lasting recovery. On that point, I take issue with the shadow Chief Secretary, the hon. Member for Runnymede and Weybridge (Mr. Hammond). In Japan, quantitative easing was used too late and too weakly to produce a strong stimulus for recovery. To produce a strong recovery here, fiscal policy is as important as monetary policy, which is why we need to maintain an equally bold direction in fiscal policy in 2010, to make it a steady year of recovery that benefits everyone.
	The real issue dividing the House is whether that stimulus should continue this year to allow for stronger growth in 2011 or whether we should engage in fiscal retrenchment through deficit reduction now. In my view, taking the latter approach this year would be disastrous for our prospects and run the risk of a double-dip recession. I take issue with the right hon. Member for Hitchin and Harpenden (Mr. Lilley) on this point: despite her many mistakes, which generated great hardship for my constituents in the 1980s, the noble Lady Thatcher did at least not cut public spending in the immediate aftermath of a recession, which the Conservative party is proposing to do now.
	Time is marching on and the wind-up speeches are about to begin. I urge the Government to continue the fiscal stimulus this year. It is a policy that will promote much-needed employment in my constituency and those of many right hon. and hon. Members. I commend the pre-Budget report to the House.

Greg Hands: It seems like an awfully long time since the publication of the PBR for us to be debating it now. If the Government had followed the Opposition's advice and moved the start of the Christmas recess, so that it was actually closer to Christmas, we could easily have debated the PBR when it was truly tropical. Nevertheless, as we know, this debate is all about the deficit and how we secure economic recovery in this, the last G20 country still in recession.
	I will deal with the deficit and bond markets in due course. However, it is interesting that today, in the week that PIMCO, one of the world's largest bond funds, starting dumping UK Government gilts and only a few weeks after the OECD, the CBI and the Bank of England all warned that there was no proper plan in place to deal with the deficit, we have seen no response from the bunker, other than the pathetic Fiscal Responsibility Bill, which panned so badly on Tuesday. Not only is there is no plan; as I said from this Dispatch Box in October, the Government seem to be reverting to the view that there is actually no problem, returning to their position of last June, which is that there will be growth in spending after all.
	I want to digress for a moment and mention one item in the PBR that has not been mentioned today, namely the one tax cut in it, which is actually another tax con. The Chancellor has reduced bingo duty from 22 to 20 per cent., without bothering to mention that it was 15 per cent. before the last Budget. The Government claim that removing VAT offset the damage, but their sums were a mess. Even with duty at 20 per cent., bingo players today are paying more.
	Listening to the Back-Bench speakers, I noticed a curious tale from those on the Government Benches. Perhaps they thought better of it, but on Tuesday there were no Government Back-Bench speakers whatever, on the Government's flagship Fiscal Responsibility Bill. Clearly the Whips put out the call today, and the call was answered. The first three speakers were, again, mainly opponents of the Government, which I think is a sign of Labour's lurch to the left. Perhaps the Whips decided to bring them in here to prevent them from plotting.
	We heard similar themes from the right hon. Members for Holborn and St. Pancras (Frank Dobson) and for Oldham, West and Royton (Mr. Meacher) and from the hon. Member for Great Grimsby (Mr. Mitchell)-real "Back to the 1980s", old Labour socialism. We even heard an incredible and wide-ranging attack on the financial services industry as a whole from the right hon. Member for Holborn and St. Pancras, which I found remarkable coming from the man who not so long ago ran to be Mayor of London.
	We also heard from two or three other Government Back Benchers who were perhaps a little less opposed and a little less socialist. The hon. Member for Sedgefield (Phil Wilson) seemed to be rather obsessed with class and what school people had been to. I shall have to disappoint him, because, in 386 years, I am the only former pupil of the state school that I attended to become a Member of Parliament, which would seem to contradict his overall thesis that everybody on the Conservative Benches comes from Eton.
	Among Opposition speakers, we heard from my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), who made a sound attack on the Fiscal Responsibility Bill and powerfully outlined the urgent need to close the deficit, the dangers of high interest rates across the economy and the lessons to be learned from domestic and international experience. My hon. Friend the Member for West Suffolk (Mr. Spring) also eloquently outlined the challenges ahead if the Government do not get a grip on the deficit. Indeed, his insights on financial matters will be much missed in the next Parliament.
	My hon. Friend the Member for Mid-Worcestershire (Peter Luff), who has had to go back to Worcestershire, also made a good speech-a real tour de force-about the PBR, and in particular about how it affects industry. I should also mention my hon. Friend the Member for Putney (Justine Greening). She tried to get in, but there was simply too much demand for speakers.
	The hon. Member for Dundee, East (Stewart Hosie), who was the only Back-Bench speaker from a party other than the two major parties, also returned our focus to the PBR and Government failings in industrial investment, and highlighted high youth unemployment.
	The hon. Member for Newcastle-under-Lyme (Paul Farrelly) made a slightly more thoughtful contribution, and we also heard a short but useful contribution from the hon. Member for Glasgow, North-East (Mr. Bain).
	To return to the deficit, the British people clearly get the message that they have over-borrowed. According to the most recent figures that I have seen, new consumer borrowing per household has fallen, from £11.11 a day in January 2008 to just 34p a day in October 2009. The equivalent figures for new Government borrowing over the same period have risen from only £3.65 to a staggering £18.44 per household per day. I applaud the efforts of the British public to get to grips with their own debt. As the shadow Chancellor said, we are all in this together. Imagine our dismay, therefore, that the good work done by the British consumer to repair his or her own balance sheet has been submerged by the explosion in Government borrowing overseen by those on the Treasury Bench.
	There is a link between consumer credit, our disastrously poor savings ratio over the past 10 years, and the all-important bond markets. The Financial Secretary to the Treasury, who is going to wind up the debate, knows that I used to work in the international fixed income markets, so he could take heed of my warnings. Official and market interest rates are currently very low, but great care will be needed in the future. Forward interest rates-the indicator of where the market thinks rates are heading-are much higher than short-term rates. In fact, the multiplier of headline long-term rates, at about 8 times the level of short-term rates, could represent a historical record. It is worth remembering, as I have said before in this place, that a half per cent. increase in interest rates is far more significant when rates are low than when they are high.
	So the market is already anticipating substantial rises in interest rates. Even before any such rises have taken effect, debt interest is projected by the Treasury itself to rise from £22 billion this year to £67 billion in 2013. Obviously, the debt interest bill will rise substantially if interest rates rise significantly. That is another reason why fiscal responsibility is so important. If the Government continue to borrow uncontrollably, not only will the interest bill rise substantially, and potentially unsustainably, but the public sector will crowd the private sector out of the credit market. Members on both sides of this House rightly urge that more credit be offered to small and medium-sized enterprises, but this will be made much harder if we do not get a grip on the public finances and, at the same time, do all that we can to keep interest rates low.
	Our deficit is the worst of any major country. As I pointed out earlier in an intervention, the overall amount of debt in countries such as Italy and Japan is higher, but they have the saving grace of having a significant savings market. This country does not have such a market, due to the appalling decline in our savings ratio over the past 10 to 12 years. This is also where the public finances link in to our consumer debt problems. The crucial point is that if we divide the percentage of GDP that each country's outstanding debt represents by its domestic savings ratio, we find that we are actually in a far worse position than other countries-possibly even than Japan.
	We are already highly dependent on foreign demand, which means that we have to keep an eye on our currency strength as well as on our international credit rating. There has been a great deal of talk in recent months of credit rating downgrades and the possibility of gilt buyers' strikes. Neither of those risks should be underestimated, but another risk is that uncontrolled borrowing will lead to higher interest rates, both for the Government and for the wider economy, almost regardless of what happens to our credit rating. The market could make borrowing much more expensive than should ordinarily be the case, and the Government could end up paying large premiums for their borrowings. So whether long-term Government borrowing rates are at 4 per cent., 6 per cent. or 8 per cent. will make a huge difference to the public finances and to how much we can spend on our cherished public services.
	My hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) called for clarity and honesty from the Government, as did the Chairman of the Treasury Select Committee, the right hon. Member for West Dunbartonshire (John McFall). The biggest failure of this Government is their failure to be honest with the public, or even with themselves. Everyone knows that the deficit will require cuts to public spending, but still the Government will not reveal their plans for departmental spending.
	This fraudulent approach was displayed in all its glory by the Chief Secretary to the Treasury on Monday night in his appearance on "Newsnight". With incredulity pushed to the limit, Jeremy Paxman asked him:
	"Do you mean to say that a government which only two or three years ago was giving us public spending forecasts for the next three years will go into this election unable to tell us what will happen over the next eleven months?"
	What was the clear, honest answer from the right hon. Gentleman?
	"No, because the comprehensive spending review is about three years; that's starting in about eighteen months time."
	Having digested that, Paxman tried again:
	"So, we are going to have a budget, are we, that is not going to tell us what's going to happen to departmental spending?"
	This time, there was an admission from the right hon. Gentleman:
	"I think that is possible."
	What a shoddy excuse for a Government!
	In conclusion, the facts are these. In 1997, Labour inherited an economy in very good shape, characterised by low national debt, flexible labour markets and strong private pensions. All three of those areas have been gravely degraded.
	I end with this thought. When it comes to spending and the deficit, the Government are behaving like a set of habitual drinkers, gathered around a table in a dingy pub as chucking-out time approaches. Everyone else in town, even those in the pub, can see that it is time for them to be slung out, but they are discussing going for one last binge. The way to avoid the hangover, they say, is to carry on drinking to the end. The worst offender is the boss himself, sat there with his two mates. Suddenly, the slightly more responsible Chancellor, who is actually the designated driver, weakly suggests that it might be time to stop. Heated discussion ensues: the Chancellor suggests that it is time for the boss to give up entirely, but suddenly, the boss's best mate of all returns from the bar clutching two bottles of whisky. Last orders are approaching for these people. The binge needs to end, the Government need to sober up and the whole country can see that it is time urgently to change course.

David Burrowes: It is a great pleasure to have secured this Adjournment debate. I think that I was the first Member to raise the issue of umbilical cord blood as a private Member's Bill, and subsequently I raised it with other hon. Members during the passage of the Human Fertilisation and Embryology Act 2008. Courtesy no doubt of Google word searches, my interest has led to a number of academics contacting me about their research into cord blood. I imagine that this debate will keep me at the top of the umbilical cord blood search page. However, my concern is to increase the understanding and application of cord blood.
	After I first raised the issue, several hon. Members spoke to me of their previous ignorance of umbilical cord blood. It is an ignorance that I shared, despite being a parent of six children and living close to one of the NHS hospitals that collects umbilical cord blood.
	Like the majority of parents in Britain, my wife and I thought that the umbilical cord once clamped was simply a waste product. We were totally unaware of the potential benefits of donating our children's umbilical cord blood. My understanding has grown over the years, aided by some excellent individuals in the charitable, private and public sectors who are passionate about cord blood. I pay tribute and thank the Anthony Nolan Trust and UK cord blood working group for their work and assistance and for rubbing off some of their passion on me. What inspires me to keep flying the flag for umbilical cord blood is meeting those children who are alive because of cord blood. This is a subject that can be literally a matter of life and death.
	Patients in the UK requiring a bone marrow donor currently have a one in four chance of survival. Only 50 per cent. of those looking for a donor will find one, and of those only 50 per cent. will survive. For those who find a bone marrow donor, many get their donor too late in their disease for the treatment to achieve success and that contributes to the 50 per cent. failure rate. Greater provision of cord blood could help those patients to get treatment faster and improve their chances of survival. For those who currently have no bone marrow donor, a larger provision of cord blood would give many of them a potentially life-saving option.
	Despite an increase in the awareness of those reading or listening to this debate, I feel that a short explanation of umbilical cord blood is in order. The baby's blood which is left behind in the umbilical cord contains many different types of cells. Some of these cells are stem cells, which have been shown to have a number of medical applications. Over the past 20 years, collected cord blood has been used for transplantation in the same way as bone marrow. It has been used to treat patients suffering from diseases such as leukaemia, sickle-cell diseases, immune deficiencies and others. Currently, there are over 85 treatments based on cord blood and there are more clinical trials in the pipeline.
	Researchers believe that cord blood has the potential to treat many more diseases, once adult stem cells are properly understood. There have been trials that show that cord blood may be helpful in treating brain injuries in children. It is also being developed for other possible treatments such as diabetes, liver therapy, multiple sclerosis, testicular cancer and to regenerate damaged heart cells. The medical and financial value of cord blood should not be underestimated. Early indications from research conducted in the UK suggests that many of the patients currently receiving enzyme treatments at a cost of well over £100,000 per annum to the taxpayer, could find a cure through a cord blood transplant.
	Cord blood is particularly valuable in the treatment of leukaemia. It can be used as an alternative to bone marrow transplants. Collection of umbilical cord blood is a far less invasive procedure than extracting bone marrow. Units can be collected, frozen and then stored for years. That leads to fewer complications and makes transplants more readily available than bone marrow. Most importantly, it is easier to find matching stem cells from cord blood than from bone marrow. A properly developed infrastructure for the collection and storage of cord blood will do much to alleviate the severe shortage of life-saving stem cells needed for transplantation and facilitate research.
	Cord blood is a natural, safe, ethical and sustainable resource. It offers many advantages over using traditional bone marrow transplants from adult donors and would offer researchers an alternative to using embryonic stem cells.
	The previous time cord blood was debated in the House was during the passage of the HFE Act in the context of allowing so-called saviour siblings. I took part in the debate, and an irony was revealed in it: the contrast between the Government stretching ethical boundaries to accommodate so-called saviour siblings, but restricting the natural, safe, ethical and sustainable life-saving resource of cord blood, with 99.5 per cent. of umbilical cords thrown away.
	However, it is important to be charitable, and over the years there has been success and progress in the field of cord blood. The NHS was one of the first bodies to recognise the potential importance of cord blood, and some of the most important breakthroughs were made here in Britain. The NHS cord blood bank was established in 1996, and at the time it was one of only a handful in the world. Last year, the fifth umbilical cord blood collection facility, at St George's hospital in Tooting, was opened. The NHS CBB has moved into a state-of-the-art facility in Filton, which provides greater capacity and the flexibility to meet future clinical standards. I have visited one of the collection hospitals at Barnet, near my constituency, and I was impressed by the professional service, with all donations collected ex utero in a separate room so that the focus remains upon the care of the mother and baby.
	As of October 2009, the NHS CBB had banked approximately 14,000 donations and provided 279 units of cord blood to British patients, with 34 per cent. coming from black and minority ethnic communities. Given that there is only a 30 to 40 per cent. chance of a BME patient finding a matched unrelated donor, it is right that there is a focus on increasing cord collection within these communities.
	However, this progress has not gone far enough. The vast majority of parents in this country do not have access to NHS umbilical cord blood collection centres, which are in London, Luton and Watford. Expecting parents are not being informed about the many benefits of donating their baby's cord blood. Even parents who have a history of blood-related disorders are not properly informed and have limited options to have their cord blood collected. Last year, an Enfield resident whose family had suffered from a rare anaemic disease contacted me in a desperate state. Her daughter was due to give birth any day and she had only just discovered by chance the value of collecting the cord blood. Fortunately, they lived near Barnet hospital, which collects cord blood, but only at certain times; they were told that unless the birth happened between 9 and 5, Monday to Thursday, the collection would not take place. Therefore, even if someone is fortunate enough to live near one of the five NHS collection hospitals, and even if they are fortunate enough to be fully informed about the potential life-saving value of cord blood to their child if they are at risk of developing a family blood-related disorder, the cord blood may still be thrown in the bin.
	At a time when the health service is so mindful of the need fully to inform patients about their health care, the issue of the collection of a mother-baby's cord blood does not seem to get the same level of attention. The principles of full information and consent do not seem to apply to cord blood, which is generally treated as a waste product, unbeknown to the parent apart from in exceptional circumstances.
	These circumstances of collection are more often dictated by the NHS collection targets than the wishes of the parents. It is hardly surprising that private companies come in to fill the void. Competition and tight regulation by the Human Tissue Authority have ensured that good practice predominates, but at a financial cost to parents. Private banking has its place, but what is lacking is access to sufficient cords available for public benefit from whatever source.
	In previous debates, I have said that the NHS bank of 14,000 blood cord units is too low. Last year, academic research confirmed that for a truly effective transplantation infrastructure to operate in a country of the UK's size and population, we will need to bank about 50,000 units of cord blood, and some people think the bar should be raised even higher. Either way, there is an urgent need for a sound projection of what is required, which should form the foundation of a comprehensive strategy for cord blood in the UK.
	At present, many patients-particularly those from ethnic minorities-who need transplants are unable to find matches. That has resulted in the NHS importing cords from the continent. The Anthony Nolan Trust has responded by collecting cords at King's College hospital, and has plans to extend this to 10 collection centres in maternity units around the country. At the request of the Government, a funding bid was submitted last June. The cord blood working group is also putting together the clinical and economic case for expansion. Will the Minister give a view on the progress of these plans?
	The UK is falling behind our European neighbours and other developed countries. Our NHS cord blood bank is smaller than those of countries of a similar size, such as France. Greater attention and resources are paid to this issue in other countries such as Spain, Italy, Germany and the United States. At present, cord blood can be used only to treat a fairly narrow set of illnesses, but scientists believe that with more research and investment it could be used to treat a much wider range of illnesses. Research in this important area has been hindered by lack of public awareness and by embryonic research crowding out other forms of research into stem cells. As a result, leading figures in this field such as Professor McGuckin and Dr. Forraz have left the UK to pursue their research in other countries that are more open to the possibilities offered by cord blood research.
	A key difficulty with cord blood transplants is the problem of engraftment where the body rejects the transplants, particularly in adolescents and adults. Until recently, UK transplanters have tended to opt for other established treatments because the reported results of cord blood usage have not been as promising. Indeed, I received news today of a health commissioner asking for a business case to be made for a prospective cord blood transplant-perhaps the Minister would comment on this worrying case.
	However, recent overseas advances in the use of cord blood and the launch last month of the first UK clinical trials of cord blood have greatly encouraged clinicians. At the instigation and under the management of Dr. Rachael Hough of University college London hospital, two clinical trials are running across the UK. The aim is to establish the safety and efficacy of using unrelated cord blood to bridge the engraftment problem, and to establish conditioning protocols. For example, it may be that by increasing the amount of cord blood stem cells-given the unique mobility involved-unrelated cord blood can provide safer and more effective life-saving treatments.
	The scientific development and application of cord blood in other countries has reached a point where it would be neglectful for the UK not to embrace to the full this exciting option. It is becoming clear that having a large range of cord blood donations available for patients to find compatible transplants would save both lives and money. It is not just the Government who need to keep up with progress in the field of umbilical cord blood; the Royal College of Obstetricians and Gynaecologists' last word on this was a 2006 report in reaction to perceived problems with some private operators, but the umbilical cord blood world in the public, charitable and private sector has made significant advances since then.
	To its credit, the Department of Health agreed to undertake a review of the collection and use of umbilical cord blood, and seminars and discussions have taken place. However, the progress of the review has been very slow. In October 2008, I asked the Secretary of State when the conclusions of these studies would be published. I was assured by the relevant Minister that the report would be made available later that year. When that did not occur, I asked the same question again-this time in March 2009-and the relevant Minister replied that these conclusions would be published in due course. It is now January 2010-happy new year-and the Department of Health has still to publish its findings.
	It is not sufficient for the Minister simply to rely on the report published by the consultant Technopolis. Indeed that report made the point when it concluded:
	"No explicit national policy has been formulated on cord blood banking in the UK, either as part of health or science policy or as part of blood bank policy."
	It went on to say:
	"We recommend that the UK...consider... Creating a high-level advisory committee to provide the Minister and policy teams with advice on the detail of such a policy."
	What is the Government's response to this recommendation and progress on it? I hope that we will hear something of the Government's conclusions from their review but will the Minister at least accept the long-standing invitation to speak to the all-party group on umbilical cord blood and adult stem cell, which I have the privilege of chairing?
	May I also ask the Government to provide regular updates on how many units of cord blood have been collected, stored and transplanted in the UK? The Government must make their views clearly known. Do they recognise the need to collect 50,000 units of cord blood? Does the Minister have a view on plans to increase numbers of blood cord transplants? I hope the Government will demonstrate a clear commitment to funding cord blood research and to the many lives that it could save.
	In September 2008, the then Health Secretary opened the Anthony Nolan Trust's excellent storage facility for cord blood with a stem cell research centre in Nottingham. He called it a "crucial development" and went on to say that there was a
	"wonderful opportunity to take advantage of"
	in terms of cord blood. There is an opportunity for more lives to be saved, for valuable scientific research to be undertaken and for the UK to become a centre for excellence in cord blood. Two people die every day waiting for a stem cell transplant and 65,000 litres of cord blood are discarded every year. Will the Minister assure the House today that the Government are taking advantage of the wonderful opportunity offered by cord blood rather than, as seems to be the case, literally throwing it away?

Gillian Merron: I thank the hon. Gentleman for that clarification, and I understand his point, but we need to give routine information that is linked to a whole approach to dealing with cord blood collection. Our priority has to be a focus on quality rather than quantity. That means finding good matches to treat those with rare tissue types.
	If we want to go further in utilising the benefits of cord blood, we need to understand how it best complements other sources of stem cell transplants, most notably bone marrow. We have to decide what the future of stem cell transplantation should look like, and what resources we will need to support it. Only when we have that can we make an informed decision on the size and scope of the NHS cord blood bank. I know that the hon. Gentleman is concerned about that.
	The hon. Gentleman mentioned the Technopolis report on cord blood that the Department of Health commissioned in 2008. That report was an important starting point, and I am happy to support many of its recommendations. Since its publication, departmental officials have been in lengthy discussions with NHS Blood and Transplant, the Anthony Nolan Trust and other players to take forward many aspects of the review. We are now working closely with the recently established umbilical cord blood transplant working group, and I believe that that will give us real insight into what is really holding back cord blood collection and use. It will delve into the practicalities of improving clinical awareness and the need for better patient information, which the hon. Gentleman has called for. It will also help us to understand where the latest research may take us in future.
	The key recommendation that came out of the Technopolis report was the need for a national strategy on cord blood. As I have said, we cannot approach the issue of cord blood transplantation in isolation. We have to think about how bone marrow and cord blood collection can complement each other and about the challenges facing us, now and in future, in relation to those sources of stem cells. We also need to define the role for all key partners, and start to bring together the various systems and structures that support stem cell transplantation to ensure even closer working. There are, of course, many different interest groups involved and I want to be absolutely sure that their views are fully represented as we take things forward, but we all have the same, singular objective-to help to save more lives.
	That is what this work is really about. We can discuss bank size, the pros and cons of one system over another or who is best at doing what-and those are all important discussions and decisions that we have to make-but all that really matters is whether we can make the difference between a person living or dying. We have to make choices that will make the biggest difference to those patients so, for me, that is what will drive our work in the future.
	I am sure that the hon. Gentleman will be delighted, therefore, when I tell the House that we are establishing an expert strategic forum that will be led by NHS Blood and Transplant, in partnership with the Department of Health and other stakeholders. This group will operate as a high-level taskforce to advise Ministers on the best options going forward, and that will mean getting to the heart of many of the issues that he quite rightly raised today in the House.
	I shall also write to my ministerial counterparts in the devolved Administrations to ask if they will be represented, so that we can get strong dialogue and co-operation across borders. My intention is for this group to produce a discussion paper in the spring of this year that will provide the basis for a new strategy on the collection and use of stem cells for transplant.
	In conclusion, like the hon. Gentleman I am extremely enthusiastic about the role that cord blood can play in the future. The reason is simple-it saves lives. It holds out the possibility of saving people who would otherwise die because of a lack of matched tissue.
	We have to make the right strategic decisions for the future, based on real expert insight into how stem cell technology is evolving and on what will deliver the very best results for patients. I am confident that the new forum, drawing on the work of the cord blood working group, will help to guide us to the right answers.